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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1999
or
[ ] Transition Report Pursuant To Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ___________ to ____________.
Commission File No. 000-21001
NMT MEDICAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-4090463
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
27 Wormwood Street, Boston, Massachusetts 02210
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (617) 737-0930
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.001 par value per share
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant on April 7, 2000 was $30,536,363, based on the last reported sale
price of the registrant's Common Stock on the Nasdaq National Market on that
date. There were 10,908,421 shares of Common Stock outstanding as of April 7,
2000.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Document into which incorporated
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Portions of the Registrant's Proxy Items 10, 11, 12 and 13 of
Statement for the Annual Part III
Meeting of Stockholders to be held on
June 1, 2000
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PART I
ITEM I. BUSINESS
OVERVIEW
NMT Medical, Inc. (together with its subsidiaries, "the Company" or "NMT"),
designs, develops and markets innovative medical devices that utilize advanced
technologies and are delivered by minimally invasive procedures. The Company's
products are designed to offer alternative approaches to existing complex
treatments, thereby reducing patient trauma, shortening procedure,
hospitalization and recovery times, and lowering overall treatment costs. The
Company's business is conducted through two divisions: Nitinol, which markets
septal repair devices, vena cava filters and self-expanding stents, and NMT
Neurosciences, which develops, manufactures and markets specialty implants and
instruments for neurosurgery, including cerebral spinal fluid ("CSF") shunts,
the Spetzler(TM) Titanium Aneurysm Clip and endoscopes and instrumentation for
minimally invasive neurosurgery. The Company's two operating segments are
managed separately. See Note 16 of Notes to the Consolidated Financial
Statements.
The Company was founded in July 1986 to develop and commercialize medical
devices using Nitinol, a nickel-titanium alloy with unique superelastic and
thermal shape memory characteristics. In April 1990, the Company obtained
clearance from the Food and Drug Administration (the "FDA") to market its
initial Nitinol-based product, the Simon Nitinol Filter ("SNF"), in the United
States. The Company entered into an exclusive distribution agreement with Bard
Radiology ("Bard") for distribution of the SNF in the United States and certain
other countries in May 1992. The Company's primary stent patent was issued in
November 1994 and, during the same month, the Company entered into an exclusive
license agreement with Boston Scientific to further develop, manufacture, market
and distribute NMT's Nitinol-based stents worldwide. In November 1995, the
Company expanded its relationship with Bard by granting Bard International the
right to distribute the SNF in most markets outside the United States. The
Company acquired the rights to the CardioSEAL Septal Occluder to expand its
product base and complement its core technologies in February 1996 and since
September 1999 has received notifications from the FDA of the approval of the
CardioSEAL under Humanitarian Use Designation regulations for three indications.
In furtherance of the Company's strategy to develop and commercialize a broad
range of advanced medical technologies for minimally invasive applications, in
July 1998, the Company acquired the neurosurgical instruments business of Elekta
AB (PUBL), a Swedish corporation ("Elekta").
In April 2000, the Company sold the Selector(R) Ultrasonic Aspirator,
Ruggles (TM) Surgical Instruments and cryosurgery product lines of its NMT
Neurosciences division to companies controlled by Integra LifeServices Holdings
Corporation for $12 million in cash. The Company used the proceeds of the
transaction for debt reduction and for general working capital requirements.
The Company's Consolidated Financial Statements for the fiscal year ended
December 31, 1999 treat these businesses, as well as its distribution of high
speed power surgical tools, as discontinued operations. See Note 3 of Notes to
the Consolidated Financial Statements.
PRODUCTS
Nitinol Division
The Company's Nitinol division markets the following devices:
. septal repair devices
. vena cava filters
. stents.
Septal Repair Devices.
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In February 1996, the Company acquired the exclusive rights to its
CardioSEAL Septal Occluder, which is designed for the repair of intracardiac
shunts commonly known as "holes in the heart." Intracardiac shunts are common
medical problems, occurring primarily in children, that result in abnormal blood
flow through the chambers of the heart. The most common defects occur in either
the arterial ("ASD") or ventricular ("VSD") septum which divide the left and
right pumping chambers of the heart. The CardioSEAL Septal Occluder is designed
to be a minimally invasive, less costly alternative to open heart surgery.
Another common septal defect is the Patent Foramen Ovale ("PFO"), a transient
hole which may open under straining efforts (coughing, defecating, etc.). PFO
has been implicated as a possible cause of embolic stroke. Current treatment
for patients who have experienced embolic strokes is lifelong anticoagulation
therapy, which may result in significant side effects and/or patient
noncompliance with the treatment regimen. Recently, some institutions have
begun advocating open heart surgery to close PFOs to prevent additional strokes.
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The CardioSEAL Septal Occluder is a catheter-delivered cardiac implant
designed to close septal defects. The framework is made of MP35N, which has
superior characteristics as an implant material (biocompatibility and corrosion
and fatigue resistance), and is covered with two pieces of knitted polyester
fabric, which promotes normal tissue in growth. The product is designed to be
manufactured in five diameter sizes ranging from 17mm to 40mm. The CardioSEAL
Septal Occluder is delivered to the site of the defect through a puncture of the
femoral vein in the leg. Once the position of the CardioSEAL Septal Occluder is
confirmed, the physician detaches the delivery system and removes it from the
patient. To date, the CardioSEAL implant procedures have taken approximately
one hour to complete, with patients returning home and able to perform normal
activity just one or two days later.
An earlier version of the septal repair device, named the Clamshell, was
developed by Bard in collaboration with Children's Hospital of Boston. Between
1989 and 1991 Bard sponsored clinical trials of the Clamshell in over 700
patients with a variety of cardiac conditions. In 1991, Bard discovered
fractures of the stainless steel framework in certain of the devices implanted
during such clinical trials and, following such discovery, suspended its
clinical trials. However, Bard subsequently submitted, and the FDA approved, a
revised IDE to permit the continued use of the Clamshell for patients with
limited therapeutic alternatives and whose status of being at high risk for
surgery made their use of the Clamshell particularly necessary. The Company is
not aware of any significant adverse clinical consequences resulting from the
observed fractures. Extensive engineering redesign and testing, including the
use of MP35N for the framework, resulted in significant improvements in both the
fatigue and corrosion resistance of the device. In 1995, Bard donated the
technology and associated assets to Children's Hospital of Boston which
subsequently licensed the technology to InnerVentions. The Company acquired the
rights to develop and commercialize the current septal repair device in February
1996. In connection with the acquisition, the Company acquired all of the
existing development, manufacturing and testing equipment, patent licenses,
know-how and documentation necessary to manufacture septal repair devices which
had been originally developed by Bard.
The Company introduced design enhancements to the CardioSEAL Occluder, the
STARflex centering system, in the fall of 1998. The design of the STARflex
centering system allows the device to self-adjust to variations in the anatomy
of a septal defect without deforming the septum and interfering with the heart
valves. These features accommodate easier implantation and the closure of
larger defects which would otherwise not be possible. STARflex was awarded the
CE Mark in September 1998 and commercialization began internationally in October
1998.
The Company believes the CardioSEAL Septal Occluder may be suitable for
approximately 55,000 patient implants annually for congenital heart defects and
approximately 145,000 adult patients annually with PFOs. Such estimates are
based on industry reports of the total numbers of patients diagnosed with such
conditions and the Company's own analysis of the portions of such populations
for whom its device may be suitable.
The CardioSEAL is sold commercially in Europe and other international
markets. In the United States, the FDA classifies the septal repair device as a
Class III medical device, which requires receipt of pre-market approval prior to
marketing. In August 1996, NMT received approval of its IDE from the FDA to
conduct a multi-center pivotal clinical trial of the CardioSEAL for ASDs at a
number of major hospitals and research centers in the United States (and one in
Canada). Implants of the device began in October 1996 and were completed in
February 1999. These patients were followed for a year while the Company
collected data on a control group of patients who had open heart surgery for the
closure of their ASDs for comparison to the CardioSEAL data. In addition, in the
fall of 1999 implants of the device with the STARflex centering system began,
with enrollment to be completed in the second quarter of 2000. The clinical data
from these trials will then be used for the submission of a pre-market approval
("PMA") Application with the FDA for the CardioSEAL.
In addition, the Company filed an IDE with the FDA in February 1998 to
pursue clinical studies for the PFO indication in the United States, and also
began PFO trials in Canada in 1998. The FDA's approval of the IDE had been
conditioned on the incorporation by the Company of certain protocol
modifications requested by the FDA. Some of the participating hospitals have
received independent institutional review board ("IRB") approval. On July 27,
1998, the Company announced that it had established an international registry to
support the clinical use of the CardioSEAL Septal Occlusion System in patients
having PFO as the likely pathway of an embolic stroke or transient ischemic
attack. The Transcatheter Occlusion of PFO In Stroke ("TOPIS") Registry allows
physicians around the world to pool their data on PFO closure in an organized
manner so as to generate a sizable database to demonstrate that closure of PFOs
with the CardioSEAL is preferable to surgery, or to a lifetime of taking
anticoagulant therapy, such as coumadin. The TOPIS registry complements the PFO
clinical trials operated in the United States and Canada by the Company.
The Company has received notifications from the FDA of the approval of the
CardioSEAL(R) Septal Occluder under Humanitarian Use Designation ("HUD")
regulations for three indications. Under HUD regulations, medical devices that
provide safe treatment for limited populations of patients can be granted
approval by the FDA based on more limited clinical experience than that required
for a full Pre-Market Approval ("PMA"). Additionally, under these regulations,
only one product can be approved for each indication. Boston Children's
Hospital worked with the Company to generate the clinical data necessary for the
approvals and on the approval application.
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The first approval was granted in September 1999 for use of the CardioSEAL
for closing fenestrated Fontan procedures. The fenestrated Fontan procedure is
a surgical procedure utilizing a baffle material (e.g. PTFE) performed in
patients born with seriously malformed hearts. As a part of this procedure, a
fenestration, or hole, is placed in the baffle to allow the patient to adjust
over time to the new hemodynamics created by the surgery, thereby reducing post-
operative morbidity and mortality. After the patient has adjusted, the closure
of the fenestration is desirable. However, re-operation of these patients to
close the fenestration can carry significant risk. The second approval, also
granted in September 1999, was granted for use of the CardioSEAL for closing
muscular ventricular septal defects in patients at high risk of morbidity or
mortality resulting from surgery. Muscular ventricular septal defects
("holes"), located at the rear of the septum or at the base of the heart, are
particularly difficult to close surgically due to poor visualization by the
surgeon. In February 2000, the Company received FDA approval under HUD
regulations for use of the CardioSEAL(R) in treating PFO in patients with
recurrent cryptogenic stroke due to presumed paradoxical embolism through a PFO
and who have failed conventional drug therapy such as coumadin. Each of the
three approved indications allows for the treatment of up to 4,000 patients per
year. A selling price of $5,500 for each device was approved.
The CardioSEAL Septal Occluder is marketed by the Company's direct sales
force in Europe and through selected distributors worldwide.
Vena Cava Filters.
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Vena cava filters are used for the prevention of pulmonary embolism (a
blood clot lodged in the vessels supplying blood to the lungs). These emboli
(clots), which often develop initially in the veins of the legs, can break loose
and travel up the vena cava, through the heart and into the blood vessels of the
lungs, causing acute respiratory and circulation problems. Vena cava filters
are intended to trap these clots before they can reach the lungs. Patients at
high risk for pulmonary embolism include post-operative orthopedic and
neurosurgery patients, cancer patients undergoing surgery and chemotherapy and
severe trauma victims. There are 600,000 incidents of pulmonary embolism
diagnosed in the United States each year, with 125,000 to 150,000 deaths per
year. While usually treated initially with anticoagulant drugs, patients at
high risk for pulmonary embolism may be treated using vena cava filters in cases
where drug therapy has failed or is contraindicated. Factors influencing the
performance of vena cava filters include coverage of the vena cava and the
pattern of the filtering method. Additionally, the variety of entry site
options and the size of the delivery system affect ease of deployment of the
vena cava filter.
Simon Nitinol Filter. The Company has developed a Nitinol vena cava filter
which possesses highly efficient clot filtering characteristics. The Company
has engineered the thermal shape-memory characteristics of Nitinol to provide
for ease of delivery of a vena cava filter which can be easily implanted in the
patient by a minimally invasive procedure using the Company's patented catheter-
based delivery systems. The Company's vena cava filter transforms into its
intended shape once deployed into the body. The SNF can be implanted from the
veins in the leg or neck, and is the only currently available vena cava filter
which can also be implanted from the veins in the arm.
The Company received FDA 510(k) clearance to market the SNF, and commenced
sales, in April 1990. All 510(k) notifications with respect to subsequent
modifications to the SNF have also been accepted by the FDA. In November 1995,
the Company introduced a simplified, straight line catheter-based delivery
system for its SNF. In November 1996, the Company received 510(k) clearance for
the implementation of the SNF through the subclavian vein in the shoulder. On
January 27, 1998, the CE Mark was granted for the SNF, which authorized the
Company to sell the SNF in the European Union beginning in July 1998.
Removable Vena Cava Filter. Currently available vena cava filters are
permanent implants which can only be removed surgically. Therefore, patients
who are at risk for pulmonary embolism for a defined period of time (post-
operative recovery, recovery from trauma, etc.) and receive a vena cava filter
have the implant in place for life. There is often a psychological resistance
to implantation of a permanent device. As a result, a vena cava filter is often
not used until a patient at risk has experienced his or her first pulmonary
embolism. However, controlled studies conducted by others of the prophylactic
use of currently available permanent vena cava filters in severe trauma patients
have demonstrated a significant reduction in morbidity and mortality in this
category of patients at high risk of pulmonary embolism. The Company believes
that the availability of a removable vena cava filter may result in greater
prophylactic use, and may be used in lieu of a permanently implanted device in
certain circumstances.
In September 1999 the Company received CE Mark approval for its unique,
Recovery(TM) removable vena cava filter device. This innovative new device is
the first implantable vena cava filter that can be removed with a simple
catheter removal procedure early after implant. If desired, the Recovery(TM)
filter may be left as a permanent filter. The approval is for the filter
implant and the filter delivery system. A separate CE Mark application for the
removal catheter was approved in December, 1999. The Company is currently
completing the validation of its manufacturing process for the product at its
Boston facility.
The Company entered into an exclusive distribution agreement in May 1992
with Bard for distribution of the SNF in the United States and certain other
countries. Beginning November 30, 1995, Bard International was granted the
exclusive right to distribute the SNF in most markets outside the United States.
Bard will begin limited distribution of the Recovery(TM) vena cava filter device
in the second quarter of 2000 and expansion of sales to broader markets will
begin later in 2000. Each of the
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distribution agreements with Bard is for an initial five year term. Bard may
renew, at its option, its agreement thereafter for periods of five years, which
it did in November 1996. The Company's agreement with Bard International renews
automatically for successive one year periods unless terminated by either party.
Both distributors are obligated to make annual minimum purchases and have agreed
not to sell competing vena cava filters during the term of the respective
distribution agreements. Bard has also agreed not to compete for an additional
two years after its distribution agreement with the Company has terminated. In
addition, the Company has granted Bard a right of first offer for any of NMT's
new devices which may be marketed to interventional radiologists and for which
NMT desires to enter into an exclusive distributorship within the United States.
Stents.
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Stents are used increasingly as adjuncts or alternatives to a variety of
medical procedures because it is believed that they are beneficial to overall
patient outcome and may, over time, reduce total treatment costs. To date, most
stents have been used for the treatment of atherosclerotic plaque in the
coronary arteries. The Company has developed and patented a Nitinol stent (the
Hex-cell stent) which relies on a novel hexagonal cell (hex-cell) design. NMT's
stents can be customized into a variety of sizes, shapes, flexibilities and
radial force characteristics for use in treating specific indications. The
Company believes that its stents may offer advantages over currently available
stents in flexibility, radial strength and placement.
In November 1994, NMT licensed to Boston Scientific, a worldwide leader in
sales of minimally invasive medical devices, exclusive worldwide rights to
develop, manufacture, market and distribute the Company's stent technology.
Under the terms of this agreement, Boston Scientific funds, and has control
over, product development, manufacturing scale-up, clinical trials, marketing
and distribution worldwide and has the sole right to use the patents and
technical information owned by NMT related to stents. Boston Scientific is not
prohibited from selling competing stents and has established a broad-based stent
program, including rights to Medinol, Ltd.'s stent technology. NMT receives a
sales royalty, milestone payments, minimum license fees, manufacturing cost
reduction incentives and reimbursement of development costs.
Boston Scientific commercially launched the Company's stents for peripheral
vascular use in Europe in January 1997 and in the United States in June 1997 for
biliary use under the name Symphony. During 1998 Boston Scientific also began
enrollment in a multi-center clinical trial for the Symphony stent in peripheral
arteries. These trials are designed to gain approval for expanded labeling for
the Symphony stent in the United States. Boston Scientific has completed a
scale-up of its peripheral vascular stent manufacturing capabilities in the
United States to enable it to manufacture NMT's stents in quantities to support
initial commercialization in certain markets. The Company and Boston Scientific
are currently pursuing projects to develop the Company's stents for a variety of
applications.
Boston Scientific is responsible for applying for registrations and
regulatory approvals it deems necessary for NMT's stents. The Company believes
that each of the vascular indications for the stent (coronary arteries, carotid
arteries, peripheral vascular, abdominal aortic and peripheral vascular stent
grafts) will require separate PMA applications prior to commercialization in the
United States.
NMT Neurosciences Division
The Company's NMT Neurosciences division develops, manufactures and markets
specialty implants and instruments for neurosurgery. The Company's
neurosurgical products business includes the following primary product lines:
. Implantable valves (shunts) and other accessories used in the management
of hydrocephalus.
. Titanium aneurysm clips for the management of intracranial aneurysms.
Shunts.
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The full line of CSF shunts sold by the Company were originally developed
by Cordis Neuroscience. CSF shunts are used to drain cerebral spinal fluid from
the brain to maintain normal fluid balance in a variety of conditions where
normal drainage is impaired. The most common condition in which these products
are used is in the management of hydrocephalus. Hydrocephalus affects
approximately one in 500 new-born children; the failure to treat this condition
leads to severe neurological complications and can be life-threatening. The
Company's product line includes a range of differential pressure valves,
including the Hakim(R) Valve, which has been the industry standard for 30 years,
and the Orbis-Sigma(R) Valve. An improved version of the Orbis-Sigma Valve, the
OSV II, was released in 1998. The OSV II is unique in its ability to regulate
both CSF flow and pressure. The Company's products also include horizontal-
vertical lumbar valves and an all-plastic valve known as the Atlas(R). The
accessories include products for the control of the over-drainage with
differential valves, as well as basic tubing and connectors.
In December 1998, the Company entered into an agreement with CS Fluids,
Inc. ("CS Fluids") of Los Altos, California to cooperatively develop and
manufacture a shunt device designed specifically to treat Alzheimer's Disease.
Under the terms of the
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agreement, NMT Neurosciences will work with CS Fluids to utilize the Company's
patented shunt technology to develop, manufacture and clinically evaluate a
shunt device with parameters specific to the Alzheimer's population. If the
device proves clinically useful, CS Fluids has the option to enter into a
manufacturing and supply relationship with NMT Neurosciences, and NMT
Neuroscienses has first rights of negotiation for distribution of the device
after the necessary regulatory approvals have been obtained. In early 1998 CS
Fluids initiated Investigational Device Exemption ("IDE") approved clinical
studies at Stanford University to examine the effects of utilizing CSF shunts in
patients with Alzheimer's Disease. Expanded trials using the NMT Neurosciences
shunt technology are expected to commence in mid 1999.
Aneurysm Clips.
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The Company's Spetzler(TM) Titanium Aneurysm Clip is used for the
management of intracranial aneurysms. The Company believes that this clip is the
only clip on the market made from commercially pure titanium, which provides
complete compatibility with modern magnetic resonance imaging. Because the clip
does not move in the high magnetic field or distort the image, the Company
believes it is safer and more effective than competing products. The
Spetzler(TM) Titanium Aneurysm Clip was developed in collaboration with Biotek
Engineering, Inc. ("Biotek") under an exclusive worldwide royalty bearing
license to the patents owned by Biotek. The clip is CE Marked, and the Company
has obtained ISO 9000 certification of the Boston manufacturing facility for its
production.
Because of the long product life cycles of the products produced by the
Neurosciences division, the Company does not anticipate making large investments
in research and development of these products. The Company's current research
and development efforts are focused on developing products that fulfill specific
identified unmet needs of neurosurgeons or making incremental improvements to
products currently within the Neurosciences division's portfolio. Research and
development for the Company's CSF Shunts and aneurysm clips are conducted at the
Company's Biot, France and Boston facilities, respectively.
Marketing and Sales Strategy.
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NMT Neurosciences has developed a dedicated sales force in neurosurgery.
The Company has direct sales forces in the United States and in Europe and
supplements its direct selling efforts with distributors and manufacturers'
representatives where direct coverage is inappropriate or not currently
feasible. The North America selling activity is managed through the division's
United States operations in Atlanta, Georgia. The Asian region is managed from
the Company's Hong Kong office with a Distributor Manager. Sales for the rest
of the world are managed through divisional headquarters in Biot, France.
MANUFACTURING
The Company manufactures the CardioSEAL Septal Occluder at its facility in
Boston, which includes a Class 10,000 clean room. The Company has received ISO
9000 certification and has also received permission to affix the CE mark to its
products.
The Company has contracted with Lake Region Manufacturing ("Lake Region")
for the production of the filter component of the SNF. The Company's agreement
with Lake Region grants Lake Region the right to manufacture a certain
percentage of the Company's worldwide requirements of the current filter until
June 30, 2001. The Company is obligated to order a minimum quantity of the
current filters and pay Lake Region a fixed price per unit. Lake Region has
agreed not to manufacture filters for a third party for a period of two years
after the termination of the agreement. Final assembly of the vena cava filter
system is conducted by the Company in its facility in Boston. The Company is
currently completing the validation of its manufacturing process for the
Recovery(TM) vena cava filter at its Boston facility.
The Company manufactures its neurosurgical instruments in a manufacturing
facility located in Biot, France. The facility has received ISO 9001 and EN
46001 certification, which are based on adherence to established standards in
the areas of quality assurance and manufacturing process control, and has also
received permission to affix the CE Mark to its products. A variety of products
utilized for the management of hydrocephalus and drug delivery are manufactured
at the Biot facility. The Spetzler(TM) Titanium Aneurysm Clip is manufactured at
the Company's manufacturing facility in Boston. The Biot facility also has a
contract manufacturing agreement with Johnson & Johnson until April 2002 for the
manufacturing of temporary pacing leads catheters.
COMPETITION
The Company believes that four companies, AGA Medical Corp., Microvena
Corporation, Dr. Osypka GmbH, and Pediatric Cardiology Custom Medical Devices
have developed devices that compete with CardioSEAL and which are being sold in
Europe and other international markets, and that AGA and Microvena are also
conducting clinical trials in the United States.
Boston Scientific, among others, currently competes with the Company in
sales of vena cava filters. Boston Scientific introduced the Greenfield Filter
to the market in the mid-1970's and is still the market leader with more than
half of current unit sales
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of vena cava filters in the United States. Since the introduction of the SNF in
1990, NMT has achieved the second highest level of sales in the United States
due primarily to its distribution agreement with Bard Radiology and the
introduction of a new simplified delivery system. Other competitors in this
market include Cook, Inc. and B. Braun.
Competition in the stent market is intense and is expected to increase.
Current competitors include Pfizer Inc./Schneider, Johnson & Johnson
Interventional Systems Co., Cook, Inc., Guidant Corporation/ACS, Arterial
Vascular Engineering, Inc., Medtronic, Inc., Boston Scientific (Medinol,
Strecker and Radius/T/) and Bard/Angiomed.
The Company believes that it has three principal competitors in the shunt
market: Medtronic, J&J Professional and Neurocare. The Company has three
principal competitors in the aneurysm clip market: Aesculap, Mizuho, and Codman.
In addition, the clip market is currently influenced by competing devices,
principally intracranial coils, to treat aneurysms.
DISCONTINUED OPERATIONS
In April 2000 the Company sold the U.K. operations of its NMT Neurosciences
division, including the Selector(R) Ultrasonic Aspirator and cryosurgery product
lines, its leased facility in Andover, England, and the Ruggles(TM) Surgical
Instruments product line to companies controlled by Integra LifeSciences
Holdings Corporation for $12 million in cash. The ultrasonic aspirator, which is
sold under the Selector(R) trademark, utilizes multiple ultrasonic frequencies
to selectively destroy and then aspirate or remove the tumor tissue. In 1998,
the Company released a more compact unit known as the Selector II, which allows
the direct attachment of the microsurgical handpiece. The Ruggles(TM) Surgical
Instruments are used in cranial and spinal surgery. Prior to the disposition of
this business the Company distributed instruments procured from instrument
makers located mostly in the United States and Germany and worked closely with
neurosurgeons to design specialty set instruments, with the name of the
neurosurgeons typically an additional trademark on the products. The
cryosurgical products are marketed under the Spembly tradename and include both
liquid nitrogen and gas expansion technologies, which have applications in
ophthalmic, general, gynecological, urological and cardiac surgery. The
Company's Consolidated Financial Statements for the fiscal year ended December
31, 1999 and 1998 reflect these product lines as discontinued operations.
In connection with the sale of the U.K. operations of its NMT Neurosciences
division, the Company decided to eliminate the distribution of its capital-
intensive product lines, specifically the high speed power surgical tools. The
Company distributed the Sodem Systems line of powered surgical tools for cranial
and spinal neurosurgery, known as the NMT High Speed System, pursuant to an
exclusive distribution agreement entered into in July 1998. The powered surgical
tools are used by neurosurgeons to create minimally invasive working channels
through the bone of the skull and spine to access the surgical site. The
Company's Consolidated Financial Statements also reflect this product line as
discontinued operations.
INVESTMENT IN IMAGE TECHNOLOGIES CORPORATION
The Company has a 41 percent ownership interest in Image Technologies
Corporation. ITC, a privately held company, is developing a line of advanced
imaging products for minimally invasive surgery which require less equipment,
are easier to use, reduce procedure time and personnel requirements, improve
operating room efficiency and reduce overall treatment costs. In addition, the
Company has extended to ITC an approximately $2.2 million senior credit line,
which is convertible into preferred stock of ITC at rates ranging from $.50 to
$9.97 per share. During 1999, ITC also issued the Company a warrant to purchase
10,030 shares of ITC's Series A Preferred Stock at an exercise price of $9.97
per share in connection with a debt financing.
Thomas M. Tully, former President and Chief Executive Officer of the
Company, was the Chairman and Chief Executive Officer of ITC until April 10,
2000 and William J. Knight, Vice President of Finance and Administration and
Chief Financial Officer of the Company, was its Chief Financial Officer until
December 15, 1999. ITC is located in leased space immediately adjacent to the
Company's facilities.
The principal products under development by ITC are:
(i) TroView, a compact, computerized image viewing system allowing for
easy, surgeon controlled enhancement of endoscopic images, including
the recording and remote transmission of both still and full motion
video. The TroView has full zoom capabilities to minimize the number
of manipulations that have to take place with the device.
(ii) TroCam/TT, an advanced endoscopic camera system for use with the
TroView. The TroCam, unlike currently available systems, places the
camera and lighting directly into the surgical field, allowing the
surgeon to personally control the field of view by pivoting the
camera and zooming in or out on the surgical field using a simple
fingertip remote control device. The camera system is protected
during surgery by a sterile, optically clear, disposable molded
plastic cover that eliminates the need to re-sterilize the camera
after each use.
6
<PAGE>
(iii) EndoCam, an endocoupler/camera system that allows rigid or flexible
endoscopes from other manufacturers to be used in conjunction with
the TroView. The coupler is a sterile, single use device, which
eliminated the need to re-sterilize the camera after each use.
(iv) Operative TroCam, an endoscopic surgical system for use with the
TroView that allows the camera system and surgical instruments to be
inserted into the body through a single puncture site.
(v) GynaCam, a disposable device for use of the camera and TroView system
for examination of the cervix.
(vi) SteriCam, an endocoupler/camera system that allows endoscopes from
other manufacturers to be used with the TroView for the estimated 10
million endoscopic surgeries performed worldwide each year. The
coupler is a sterile, single use device, which eliminates the need to
re-sterilize the camera after each use.
In November 1998, ITC began commercialization of its first products. ITC
was awarded the CE Mark for the TroView and SteriCam products in October 1998,
and in January 1999 received 510(k) approval for sale in the United States from
the FDA for both products. With these approvals, the TroView and SteriCam
products may now be sold in most international markets. Shipments to
distributors have been initiated, and clinical demonstrations of the product to
hospital customers have also begun.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company seeks to protect its technology through the use of patents and
trade secrets. The Company is the owner or licensee of 34 issued United States
patents, and corresponding foreign patents, relating to its neurosurgical
instruments products, stents, the SNF, the septal repair device, nitinol
radiopaque markers and other cardiovascular devices. In addition, the Company
has pending applications for additional patents in the United States and abroad.
The Company's owned United States and foreign patents and patent applications
cover its neurosurgical instruments products, stents, methods of manufacturing
its stents, methods and devices for inserting its neurosurgical instruments
products, stents and its SNF. The expiration dates of the Company's patents
relating to its neurosurgical instruments range from 2003 to 2015. The
expiration dates of the Company's patents relating to its stents range from 2012
to 2013. The patent for its vena cava filters expires in 2001, and the patent
for its radiopaque markers expires in 2014. In addition, the Company is the
exclusive licensee under certain patents relating to the CardioSEAL Septal
Occluder and methods for repairing cardiac and vascular defects. The Company
also holds licenses to certain technology used in the SNF and in nitinol septal
repair devices.
The Company also relies on trade secrets and technical know-how in the
development and manufacture of its devices, which it seeks to protect, in part,
through confidentiality agreements with its employees, consultants and other
parties. The Company has 14 trademarks, 11 of which are registered with the
United States Patent and Trademark Office.
LICENSED TECHNOLOGY; ROYALTY OBLIGATIONS
In connection with its septal repair device, the Company has obtained an
exclusive worldwide license from Children's Medical Center Corporation under
United States patents entitled "Occluder and Method for Repair of Cardiac and
Vascular Defects" and "Occluder for Repair of Cardiac and Vascular Defects" and
the respective corresponding foreign patents, patent applications and associated
know-how. The license agreement provides for royalty payments of five percent
based on net sales of the Company's CardioSEAL Septal Occluder until either the
end of the term of the patents or termination of the agreement. The patents
expire in September 2012 and June 2012, respectively. Pursuant to the license
agreement, the Company is required to achieve certain milestones in exploiting
the patent rights. The Company has achieved all required milestones to date.
If the Company fails to achieve the milestones, Children's Medical Center
Corporation may terminate the license agreement. The Company also has a
royalty-free, worldwide sublicense under the U.S. patent entitled "System for
the Percutaneous Transluminal Front-End Loading Delivery and Retrieval of a
Prosthetic Occluder" and its corresponding foreign patents and associated know-
how. The sublicense is exclusive in the field of the repair of atrial septal
defects and nonexclusive in certain other fields. The Company has also obtained
an exclusive worldwide license from Lloyd A. Marks, M.D. under the United States
patent entitled "Aperture Occlusion Device." The license agreement with Dr.
Marks provides for royalty payments based on net sales of nitinol septal repair
devices which are covered by the patent until the end of term of the patent in
2011. Certain minimum royalty payments must be paid regardless of net sales.
In connection with the SNF, the Company entered into a Technology Purchase
Agreement dated April 14, 1987 with Morris Simon, M.D., the Company's Chief
Scientific Director and co-founder and a current Director of the Company.
Pursuant to the agreement, Dr. Simon assigned all the technology relating to the
SNF to the Company in exchange for certain royalty payments based on net sales
of technology invented by Dr. Simon relating to the SNF, to continue perpetually
unless the agreement is sooner terminated. Dr. Simon agreed not to compete with
the Company in the vena cava filter market during the term of the agreement In
connection with the agreement, Beth Israel Hospital Association granted the
Company an exclusive worldwide license under the
7
<PAGE>
United States patent entitled "Blood Clot Filter." In consideration for the
license, Dr. Simon assigned a percentage of his royalty payments from the
Company to Beth Israel Hospital Association.
Pursuant to his employment agreement, the Company has agreed to pay
royalties of one to five percent to Mr. Stephen J. Kleshinski based on sales or
licenses of products where Mr. Kleshinski was the sole or joint inventor.
GOVERNMENT REGULATION
The manufacture and sale of medical devices intended for commercial
distribution are subject to extensive governmental regulations in the United
States. Medical devices are regulated in the United States by the FDA under the
Federal Food, Drug and Cosmetic Act (the "FDC Act") and generally require pre-
market clearance or pre-market approval prior to commercial distribution. In
addition, certain material changes or modifications to medical devices also are
subject to FDA review and clearance or approval. Pursuant to the FDC Act, the
FDA regulates the research, testing, manufacture, safety, labeling, storage,
record keeping, advertising, distribution and production of medical devices in
the United States. Noncompliance with applicable requirements can result in
failure of the government to grant pre-market clearance or approval for devices,
withdrawal of approvals, total or partial suspension of production, fines,
injunctions, civil penalties, recall or seizure of products, and criminal
prosecution. The FDA also has the authority to request repair, replacement or
refund of the cost of any device manufactured or distributed by the Company.
Medical devices are classified into one of three classes, Class I, II or
III, on the basis of the controls deemed by the FDA to be necessary to
reasonably ensure their safety and effectiveness. Generally, Class III devices
are those that must receive pre-market approval by the FDA to ensure their
safety and effectiveness (e.g., life-sustaining, life-supporting and implantable
devices, or new devices which have not been found to be substantially equivalent
to legally marketed devices), and require clinical testing to ensure safety and
effectiveness and FDA approval prior to marketing and distribution. The FDA
also has the authority to require clinical testing of Class I and Class II
devices. A PMA application must be filed if a proposed device is not
substantially equivalent to a legally marketed predicate device or if it is a
Class III device for which the FDA has called for such applications.
If human clinical trials of a device are required and if the device
presents a "significant risk," the manufacturer or distributor of the device is
required to file an IDE application with the FDA prior to commencing human
clinical trials. The IDE application must be supported by data, typically the
results of animal and, possibly, mechanical testing. If the IDE application is
approved by the FDA, human clinical trials may begin at a specific number of
investigational sites with a maximum number of patients, as approved by the
agency. Sponsors of clinical trials are permitted to sell those devices
distributed in the course of the study provided such costs do not exceed
recovery of the costs of manufacture, research, development and handling. The
clinical trials must be conducted under the auspices of an independent IRB
established pursuant to FDA regulations. If one or more IRBs determine that a
clinical trial involves a "nonsignificant risk" device, the sponsor of the study
is not required to obtain FDA approval of an IDE application before beginning
the study. However, prior IRB approval of the study is required and the study
must be conducted in compliance with the applicable FDA regulations, including,
but not limited to, FDA regulations regarding the protection of human subjects.
Generally, before a new device can be introduced into the market in the
United States, the manufacturer or distributor must obtain FDA clearance of a
pre-market notification ("510(k) notification") submission or approval of a PMA
application. If a medical device manufacturer or distributor can establish that
a device is "substantially equivalent" to a legally marketed Class I or Class II
device, or to a Class III device for which the FDA has not called for PMAs, the
manufacturer or distributor may seek clearance from the FDA to market the device
by filing a 510(k) notification. The 510(k) notification may need to be
supported by appropriate data establishing the claim of substantial equivalence
to the satisfaction of the FDA. The FDA's Modernization Act of 1997 (the
"Modernization Act") was adopted with the intent of bringing better definition
to the process for clearing 510(k) submissions. Although it is expected that
the Modernization Act will result in shorter cycle times for clearances of
510(d) submissions, there can be no assurance that the FDA review process will
not involve delays or that such clearances will be granted on a timely basis.
If a manufacturer or distributor of medical devices cannot establish that a
proposed device is substantially equivalent to a legally marketed device, the
manufacturer or distributor must seek pre-market approval of the proposed device
through submission of a PMA application. A PMA application must be supported by
extensive data, including preclinical and clinical trial data, as well as
extensive literature to prove the safety and effectiveness of the device. The
Modernization Act allows the filing of a PMA to be modular, permitting the FDA
to initiate review of the submission prior to completion of all sections. Under
the FDC Act, the FDA has 180 days to review a filed PMA application. Again,
although the changes in the PMA application review process are designed to
shorten review times, there can be no assurance that delays will be eliminated
or that PMA clearances will be granted on a timely basis.
Certain Class III devices that were on the market before May 28, 1976
("preamendments Class III devices"), and devices that are determined to be
substantially equivalent to them, can be brought to market through the 510(k)
process until the FDA, by regulation, calls for PMA applications for the
devices. Generally, the FDA will not grant 510(k) clearance for such devices
unless the facilities at which they are manufactured successfully undergo an FDA
pre-approval GMP inspection. In addition, the FDC Act
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<PAGE>
requires the FDA either to down-classify preamendments Class III devices to
Class I or Class II, or to publish a classification regulation retaining the
devices in Class III. Manufacturers of preamendments Class III devices that the
FDA retains in Class III must have PMA applications accepted by the FDA for
filing within 90 days after the publication of a final regulation in which the
FDA calls for PMAs. If the FDA calls for a PMA for a preamendments Class III
device, a PMA must be submitted for the device even if the device has already
received 510(k) pre-market clearance; however, if the FDA down-classifies a
preamendments Class III device to Class I or Class II, a PMA application is not
required. The FDA's reclassification determinations are to be based on safety
and effectiveness information that manufacturers of certain preamendments Class
III devices are required to submit to the FDA as set forth in two FDA orders
published in August 1995.
With the passage of the Safe Medical Devices Act of 1990, Congress sought
to improve the framework to regulate medical devices. Congress recognized that
for diseases and conditions affecting small populations, a device manufacturer's
research and development costs could exceed its market returns, thereby making
development of such devices unattractive. The HUD regulations were created to
provide an incentive for development of devices to be used in the treatment of
diseases or conditions affecting small numbers of patients. Under HUD
regulations, medical devices that provide safe treatment and a reasonable
assurance of effectiveness may be made available to small numbers of patients
(up to 4,000 patients in the U.S. per year) on more limited clinical
experience than that required for a PMA. In addition, under HUD regulations
only one product can be approved for each indication.
The current regulatory environment in Europe for medical devices differs
significantly from that in the United States. There are several different
regulatory regimes operating within the different European countries. Regulatory
requirements for medical devices range from no regulations in some countries to
rigorous regulations approaching the requirements of the FDA's regulations for
Class III medical devices. Several countries require that device safety be
demonstrated prior to approval for commercialization. The regulatory environment
in certain European countries has undergone major changes as a result of the
creation of medical device directives by the European Union. In particular, the
European Union has promulgated rules which provide that medical products may not
be marketed and sold commercially in the countries in the European Economic Area
unless they receive a CE mark. The Company's Symphony stent, SNF, Recovery
filter and CardioSEAL, and ITC's TroView and SteriCam have received approval for
CE Marking.
THIRD PARTY REIMBURSEMENT
Health care providers in the United States, such as hospitals and
physicians, that purchase medical devices such as shunts and stents, generally
rely on third party payers, principally Medicare, Medicaid and private health
insurance plans, to reimburse all or part of the costs and fees associated with
the Company's devices. Major third party payers reimburse inpatient medical
treatment, including all operating costs and all furnished items or services,
including devices such as the Company's, at a prospectively fixed rate based on
the diagnosis-related group ("DRG") that covers such treatment as established by
the federal Health Care Financing Administration. For interventional
procedures, the fixed rate of reimbursement is based on the procedure or
procedures performed and is unrelated to the specific devices used in that
procedure. The amount of profit relating to the procedure may be reduced by the
use of the Company's devices. If a procedure is not covered by a DRG, certain
third party payers may deny reimbursement. Alternatively, a DRG may be assigned
that does not reflect the costs associated with the use of the Company's
devices, resulting in underreimbursement. If, for any reason, the Company's
products were not to be reimbursed by third party payers, the Company's ability
to sell its products may be materially adversely affected. Mounting concerns
about rising health care costs may cause more restrictive coverage and
reimbursement policies to be implemented in the future. Several states and the
federal government are investigating a variety of alternatives to reform the
health care delivery system and further reduce and control health care spending.
These reform efforts include proposals to limit spending on health care items
and services, limit coverage for new technology and limit or control directly
the price health care providers and drug and device manufacturers may charge for
their services and products. The Company believes that domestic health care
providers currently are reimbursed for the cost of purchasing the Company's SNF.
In the international market, reimbursement by private third party medical
insurance providers, including governmental insurers and providers, varies from
country to country. In certain countries, the Company's ability to achieve
significant market penetration may depend upon the availability of third party
governmental reimbursement. The Company's independent distributors, and the
health care providers to whom such distributors sell, obtain any necessary
reimbursement approvals.
PRODUCT LIABILITY AND INSURANCE
The Company's business involves the risk of product liability claims. The
Company maintains product liability insurance with coverage limits of $1 million
per occurrence per policy year and an umbrella policy of $10 million.
EMPLOYEES
As of December 31, 1999, NMT employed 313 full-time employees and 21 part-
time employees. The Company believes it maintains good relations with its
employees.
9
<PAGE>
ITEM 2. PROPERTIES
The Company currently leases an approximately 27,000 square foot
manufacturing, laboratory and administrative facility in Boston, Massachusetts.
The Company also owns an approximately 80,000 square foot, state-of-the-art
plant located in Biot, France, and leases an 11,500 square foot warehousing
facility in Deluth, Georgia to house the United States operations, sales and
marketing activities of the NMT Neurosciences division.
The Company's principal executive offices are located at 27 Wormwood
Street, Boston, Massachusetts 02210, and its telephone number is (617) 737-0930.
ITEM 3. LEGAL PROCEEDINGS
In March 1999, the Company filed a patent infringement suit in the U.S.
District Court for Massachusetts against AGA Medical Corp. ("AGA"), claiming
that AGA's Amplatzer Septal Occlusion device violates U.S. Patent No. 5,108,420,
which is licensed exclusively to the Company. The Company is seeking to prevent
further infringement of its patent as well as monetary damages. In April 1999,
AGA served its Answer and Counterclaims denying liability and alleging that the
Company has engaged in false or misleading advertising and in unfair or
deceptive business practices. AGA's counterclaims seek an injunction and an
unspecified amount of damages. In May 1999, the Company answered AGA's
counterclaims denying liability. The case is currently in the early states of
discovery.
In papers dated November 24, 1999 Elekta AB (publ) filed a request for
arbitration in the London Court of International Arbitration ("LCIA") alleging
that the Company breached its payment obligation under the Sale and Purchase
Agreement between the parties dated May 8, 1998 pursuant to which the Company
purchased certain assets from Elekta. Elekta seeks approximately $1.6 million
in damages. On January 14, 2000, the Company filed its response with the LCIA
in which the Company denied Elekta's claims and indicated that it would assert a
counterclaim for approximately $2.5 million for Elekta's breach of the same
contract. On February 17, 2000 an arbitrator was appointed, and a Statement of
the Case was sent to the LCIA by Elekta on March 23, 2000. The parties are
currently in the pleadings stage.
On January 21, 2000, a personal injury suit was filed in the Supreme Court
of the State of New York, County of New York by Martin B. Levi, et. al. against
Johnson & Johnson, Inc., et. al., including a subsidiary of the Company,
claiming damages from placement of a defective Palmaz-Schatz coronary stent
during a cardiac catherization procedure. Plaintiffs seek damages in excess of
$31 million. The Company has requested that plaintiffs dismiss the Company's
subsidiary from the action on the basis that the subsidiary never manufactured
and/or distributed the stent product.
Other than as described above, the Company has no material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1999.
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EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------
The executive officers of the Company and their ages as of April 11, 2000
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
C. Leonard Gordon 70 Acting President, Chief Executive Officer
and Director
David A. Chazanovitz 49 President, NMT Neurosciences Division
William J. Knight 50 Vice President of Finance and
Administration, Chief Financial Officer,
Secretary and Treasurer
</TABLE>
C. LEONARD GORDON was appointed Acting President and Chief Executive
Officer of NMT in April 2000. Mr. Gordon, a co-founder of the Company, served as
the Company's Chief Executive Officer and President, from August 1990 to January
1996 and as Chairman of the Board from January 1996 until January 1998. Mr.
Gordon has served as a director of the Company since its inception in 1986. Mr.
Gordon has been engaged in venture capital enterprises for more than 10 years,
particularly in the field of new medical technologies and devices. He was
co-founder and Chief Executive Office of (i) Oxigene, Inc. a publicly-traded
company engaged in the design and development of drugs and (ii) Biofield Corp.,
a publicly-traded medical device company that has developed a breast cancer
detection system. Mr. Gordon served as Chairman of the Board and Chief
Executive Officer of Immunotherapy, Inc., a privately-held biotechnology company
and as President and Chief Executive Officer of Vacold LLC, a developmental
biotechnology company.
DAVID A. CHAZANOVITZ has served as President, NMT Neurosciences Division
since July 1998. From January 1996 to July 1998, Mr. Chazanovitz served as
President of NMT's Septal Repair Division. Prior to joining the Company, Mr.
Chazanovitz served as President and Chief Executive Officer of InnerVentions
from April 1995 until January 1996. Mr. Chazanovitz was employed by Bard from
1979 to 1995 in various positions including President of the USCI Angiography
Division, Bard Electrophysiology Division and Bard Ventures Division where he
was a founder. During his last two and one-half years at Bard, Mr. Chazanovitz
had overall responsibility for the septal defect repair program.
WILLIAM J. KNIGHT has served as Vice President of Finance and
Administration and Chief Financial Officer since September 1998. From August
1996 until September 1998, Mr. Knight held the position of Vice President
Administration and Chief Financial Officer of Zoll Medical Corporation, a
medical device manufacturer. From September 1989 to February 1996, Mr. Knight
was Vice President, Corporate Controller of Analytical Technology, Inc., a
manufacturer of scientific instrumentation, which was acquired by ThermoElectron
Corporation in December 1995.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Prices and Recent Sales of Unregistered Securities
The Company's Common Stock is quoted on the Nasdaq National Market System
under the symbol NMTI. There were approximately 100 stockholders of record of
the Company's Common Stock on April 7, 2000. The following table lists for the
periods indicated the high and low bid prices for the Company's Common Stock.
<TABLE>
<CAPTION>
Period High Low
------ ---- ---
<S> <C> <C>
1998
----
First quarter............ 11 1/8 6 3/4
Second quarter........... 10 1/2 5 1/4
Third quarter............ 7 13/16 2 15/16
Fourth quarter........... 5 5/8 2 1/2
1999
----
First quarter............ 5 5/8 3 1/4
Second quarter........... 4 1/2 2 3/8
Third quarter............ 7 1/2 1 3/4
Fourth quarter........... 3 1/8 1 3/4
</TABLE>
During the fiscal year ended December 31, 1999, the Company issued the
following unregistered securities:
In April 1999, the Company issued a warrant to purchase 25,000 shares of
Common Stock at an exercise price of $3.41 per share, to a noteholder of the
Company. The warrants may be exercised at any time and from time to time until
February 14, 2001. The warrant contains weighted-average anti-dilution price
protection. These securities were offered and issued in reliance upon the
exemption from registration set forth in Section 4(2) of the Securities Act of
1933, as amended.
Dividend Policy
- ---------------
The Company did not declare or pay any cash dividends on shares of its
Common Stock during the fiscal years ended December 31, 1998 and December 31,
1999 and does not anticipate declaring or paying cash dividends in the
foreseeable future. The Company expects that any earnings which it may realize
will be retained for use in its business.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Selected Consolidated Financial Data. The following selected consolidated
financial data are derived from the Company's Consolidated Financial Statements,
which have been audited by Arthur Andersen LLP, independent public accountants.
The selected consolidated financial data set forth below should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the other financial information appearing elsewhere in this
Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1996 1997 1998 1999
-------- --------- --------- --------- ----------
STATEMENT OF OPERATIONS DATA: In thousands, except per share data
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales $ 2,716 $ 4,557 $ 8,565 $ 23,024 $ 32,949
License fees and royalties 625 2,375 1,500 2,029 2,130
Product development 492 92 61 1 --
------- ------- ------- -------- --------
3,833 7,024 10,126 25,054 35,079
Expenses:
Cost of product sales 1,264 2,387 3,765 10,819 15,215
Research and development 871 2,662 2,974 3,640 4,462
General and administrative 871 2,284 2,873 5,043 9,050
Selling and marketing 169 311 1,010 4,391 8,428
In-process research and development -- 1,111 2,449 4,710 --
Write-down of note receivable from
Image Technologies Corporation -- -- -- -- 1,364
Impairment of long-lived asset -- -- -- -- 6,801
Merger and integration charge -- -- -- 687 --
Restructuring charge -- -- 194 -- --
------- ------- ------- -------- --------
3,175 8,755 13,265 29,290 45,320
------- ------- ------- -------- --------
Income(loss) from operations 658 (1,731) (3,139) (4,236) (10,241)
Equity in loss of affiliate -- -- -- (437) (489)
Currency transaction (loss) gain -- -- (15) (88) 105
Interest income (expense), net (29) 568 1,546 (293) (2,335)
------- ------- ------- -------- --------
Income(loss) before provision for income taxes 628 (1,163) (1,608) (5,054) (12,960)
Extraordinary loss on early extinguishment of debt -- -- -- -- (2,618)
Provision for income taxes 44 -- 230 745 180
------- ------- ------- -------- --------
Net gain (loss) from continuing operations 584 (1,163) (1,838) (5,799) (15,758)
Net gain (loss) from discontinued operations -- -- -- 2,120 (3,295)
------- ------- ------- -------- --------
Net income(loss) $ 584 $(1,163) $(1,838) $ (3,679) $(19,053)
======= ======= ======= ======== ========
Cash dividends declared per common share $ .03 $ -- $ -- $ -- $ --
======= ======= ======= ======== ========
Basic income (loss) per share:
Continued operations $.16 $(.21) $(.19) $(.57) $(1.47)
Discontinued operations -- -- -- .21 (.31)
------- ------- ------- -------- --------
Net income (loss) $.16 $(.21) $(.19) $(.36) $(1.77)
======= ======= ======= ======== ========
Diluted income (loss) per share $.15 $(.21) $(.19) $(.36) $ (1.77)
======= ======= ======= ======== ========
Weighted average common shares outstanding
Basic 3,764 6,749 9,596 10,193 10,751
======= ======= ======= ======== ========
Diluted 3,983 6,749 9,596 10,193 10,751
======= ======= ======= ======== ========
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
At December 31,
1995 1996 1997 1998 1999
------- ------- ------- -------- --------
In Thousands
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 533 $ 4,082 $ 5,561 4,007 3,533
Short-term investments -- 25,273 20,822 5,114 --
Working capital (deficit) (1,277) 30,301 29,262 17,343 8,765
Total assets 1,661 34,930 35,006 63,715 38,747
Long-term obligations -- 416 612 18,903 14,853
Stockholders' equity (deficit) (844) 33,320 32,772 34,169 14,161
</TABLE>
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included elsewhere in this Annual Report
on Form 10-K. This Annual Report on Form 10-K contains forward-looking
statements based on our current expectations, assumptions, estimates and
projections about the Company and our industry. These forward-looking
statements are usually accompanied by words such as "believes," "anticipates,"
"plans," "expects" and similar expressions. Forward-looking statements involve
risks and uncertainties, and our actual results may differ materially from the
results anticipated in these forward-looking statements as a result of certain
factors, as more fully described in this section under the caption "Certain
Factors That May Affect Future Results."
OVERVIEW
Since its inception in 1986, the Company has focused its efforts of the
design, development and commercialization of medical technologies which are
delivered by minimally invasive procedures. Products and products under
development include septal repair devices, vena cava filters and self-expanding
stents. In July 1998, the Company acquired the neurosurgical instruments
business ("ENI") of Elekta AB (PUBL) and operated the business as the Company's
NMT Neurosciences division. In April 2000, following a decision by the
Company's board of directors to discontinue the U.K. operations of its NMT
NeuroSciences division, the Company sold certain assets of that division,
including the Selector(R) Ultasonic Aspirator, and Ruggles(TM) Surgical
instruments products. This sale reflected the Company's strategic decision to
refocus its efforts on its core septal repair, filter and stent products.
The Company recorded a $3.5 million loss on this sale comprised of
proceeds of $12 million, estimated transaction and other costs of $3.7 million
and net assets sold of $11.8 million. The transaction costs consisted
principally of legal and accounting fees, severance arrangements with certain
employees and other estimated costs associated with discontinuing the operation
and consummating the sale.
The Company's initial product, a vena cava filter system, received FDA
clearance in 1990. This product is distributed in the United States and certain
other countries by Bard and in other markets outside the United States by Bard
International. Both distributors are obligated to make annual minimum
purchases. The filter component of the current vena cava filter system is
manufactured by Lake Region. The Company currently purchases components of its
delivery systems of the vena cava filter system under purchase orders with third
party suppliers. Final assembly of the vena cava filter system is done by the
Company.
In November 1994, the Company entered into an agreement with Boston
Scientific pursuant to which Boston Scientific obtained exclusive worldwide
rights to develop, manufacture, market and distribute the Company's stent
technology and products which incorporate such technology. Under this license
agreement, Boston Scientific is responsible for performing clinical trials for
stents under development and for reimbursing the Company for stent development
costs incurred by the Company. These reimbursements are classified as product
development revenues in the Consolidated Statement of Operations. The Company
also receives license fees, including milestone payments, royalties based upon
product sales and certain manufacturing cost reduction incentive payments from
Boston Scientific under the license agreement, which are included in the
Company's revenues. See "Results of Operations." Most of the Company's costs
associated with its stents are included in research and development expenses.
In February 1996, the Company acquired, through the issuance of Common
Stock, the rights to develop and commercialize its septal repair device. The
Company commenced sales of the CardioSEAL Septal Occluder at the end of
September 1996 in connection with clinical trials of the device, and the device
has been sold commercially in Europe and other international markets since July
1997. Since September 1999, the FDA has granted approval for use of the
CardioSEAL product under HUD regulations for three indications. The Company
manufactures this device at its facility in Boston.
The Company has agreed to make certain royalty payments to Children's
Medical Center Corporation based on net sales of the CardioSEAL Septal Occluder.
The Company has also agreed to pay certain royalties to Morris Simon, M.D., the
Company's Chief Scientific Director, co-founder and a current Director, and to
Beth Israel Hospital, Boston, based on sales of products using the technology
invented by Dr. Simon relating to the SNF. In addition, pursuant to the
Company's employment agreement with Mr. Stephen J. Kleshinski the Company has
agreed to pay certain royalties based on sales or licenses of products where Mr.
Kleshinski was the sole or joint inventor.
In July, 1998, the Company acquired the neurosurgical instruments business
of Elekta AB (PUBL), a Swedish corporation, for approximately U.S. $33 million
in cash. In connection with the acquisition, the Company issued a total of
675,000 shares of Common Stock to J.H. Whitney & Co. and to one of its
affiliates at a purchase price of $5.80 per share. Jeffrey R. Jay, a director of
the Company, is a general partner of J.H. Whitney & Co. and Jeffrey F. Thompson,
also a director of the Company, is a Vice President of J.H. Whitney & Co.
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The acquisition was financed with $13 million of cash, plus approximately
$3.1 million of acquisition costs, and a $20 million subordinated note issued to
an affiliate of a significant stockholder of the Company. The subordinated note
is due September 30, 2003 with quarterly interest payable at 10.101% per annum.
The subordinated debt includes certain restrictive covenants relating to
maintenance of certain ratios and cash levels. On September 13, 1999, the
Company entered into a $10 million senior secured debt facility with a bank, $8
million of the proceeds of which was used to reduce the principal amount of the
$20 million subordinated note. The Company also used $6 million of its own cash
to further reduce the principal amount of the $20 million subordinated note. The
balance outstanding under the subordinated note at December 31, 1999 was
approximately $5.2 million. The remaining $2 million of the senior secured debt
facility is available to be drawn down by the Company for working capital
purposes, as needed. The facility has a term of three years with interest
payable monthly at the bank's prime lending rate on U.S. borrowings and an
equivalent market rate on foreign currency borrowings. As of December 31, 1999,
the Company was not in compliance with certain of the debt covenants contained
in both the subordinated note agreement and the senior secured debt agreement.
As a result, the Company negotiated a waiver of default with each of these
debtholders. Additionally, subsequent to year end, the Company used the proceeds
from its sale of the U.K. operations and certain other assets of the NMT
Neurosciences division (See Note 3(a) of the Notes to Consolidated Financial
Statements in the accompanying financial statements) to reduce the subordinated
note payable and the senior secured debt by $500,000 and $7.3 million,
respectively.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998
Revenues. Revenues for the year ended December 31, 1999 increased to $35.1
million from $25.1 million for the year ended December 31, 1998. Product sales
increased to $32.9 million for the year ended December 31, 1999 from $23.0
million for the year ended December 31, 1998. The increase is primarily
attributable to the effect of including a full year's revenues related to the
Company's NMT Neurosciences division during 1999 when compared to 1998 as the
Company acquired this division on July 8, 1998. Additionally the Company had
increased unit sales of vena cava filters and CardioSEAL Septal Occluders in the
year ended December 31, 1999 as compared with the year ended December 31, 1998.
Finally, in September 1999, the Company received approvals from the FDA for use
of the CadioSEAL Septal Occluder under certain HUD regulations which contributed
to the increased unit sales of that product during the year ended December 31,
1999.
License fees and royalties for the year ended December 31, 1999 amounted to
$2.1 million and consist of royalty payments of $1.5 million and cost-sharing
payments received from Boston Scientific of approximately $300,000 and patent
license payments of approximately $400,000. The Company recorded $2.0 million in
license fees and royalties from Boston Scientific related to its stent
technology in the year ended December 31, 1998, consisting of $300,000 of
milestone payments, $1.5 million of royalty payments, and $200,000 of cost-
sharing payments received from Boston Scientific.
Cost of Product Sales. Cost of product sales increased to $15.2 million for
the year ended December 31, 1999 from $10.8 million for the year ended December
31, 1998. The increase is primarily attributable to the effect of including a
full year's cost of sales related to the Company's NMT Neurosciences division
during 1999 when compared to the partial year in 1998. Also contributing to
this increase were costs attributable to the Company's increased unit sales of
vena cava filters and CardioSEAL Septal Occluders in the year ended December 31,
1999 as compared with the year ended December 31, 1998. Cost of product sales,
as a percent of product sales, remained relatively consistent at 46% for the
year ended December 31, 1999 as compared with 47% for the year ended December
31, 1998.
Research and Development. Research and development expense increased to $4.5
million for the year ended December 31, 1999 from $3.6 million for the year
ended December 31, 1998. The increase is primarily attributable to the effect
of including a full year of research and development expenses related to the
Company's NMT Neurosciences division during 1999 when compared to the partial
year in 1998. Also contributing to this increase in research and development
expense were increased regulatory and clinical trial expenses relating to
clinical trials of the CardioSEAL Septal Occluder, as well as for more recent
clinical trials related to fenestrated Fontan procedures (FEF), and ventricular
septal defects (VSDs) for which the Company received FDA approval under HUD
regulations in September 1999. In addition, the Company has had increased
activity in the Company's development programs for vena cava filters, including
CE Mark approval for its removable vena cava filter in September 1999, and for
other products under development.
General and Administrative. General and administrative expenses increased to
$9.1 million for the year ended December 31, 1999 from $5.0 million for the year
ended December 31, 1998. The increase is primarily attributable to the effect
of including a full year of general and administrative expenses related to the
Company's NMT Neurosciences division during 1999 when compared to the partial
year in 1998. In addition, the Company had increased professional fees and
travel expenses related to supporting the operations of the Company's NMT
Neurosciences division for the full year ended December 31, 1999 as compared to
the partial year for the year ended December 31, 1998.
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Selling and Marketing. Selling and marketing expenses increased to $8.4
million for the year ended December 31, 1999 from $4.4 million for the year
ended December 31, 1998 primarily attributable to the effect of including a full
year of selling and marketing expenses related to the Company's NMT
Neurosciences division during 1999 when compared to the partial year in 1998.
During 1998, marketing activities related to the CardioSEAL Septal Occluder
relating to clinical trials and the commencement of commercial sales of the
CardioSEAL Septal Occluder that began in June 1997 in European and other
international markets increased. During 1999, the marketing efforts related to
these clinical trials decreased as the trials were coming to completion.
However, marketing efforts were increased for new clinical trials relating to
fenestrated Fontan procedures (FEF), and ventricular septal defects (VSDs) for
which the Company received FDA approval under HUD regulations in September 1999.
Write Down of Notes Receivable from Image Technologies Corporation. During
the year ended December 31, 1999, the Company performed a detailed review of the
ITC operations. Based upon this analysis and discussion with ITC's management
and other investors, the Company determined that there was a significant risk
that the Company's notes receivable from ITC would not be repaid. The analyses
and discussions indicated that at September 30, 1999, (1) ITC had insufficient
cash resources to fund its operations, (2) ITC's product revenue had declined
during the year ended December 31, 1999 and was significantly below planned
levels and (3) ITC was seeking additional capital from numerous sources and that
any future financings would likely be dilutive to the Company's equity position
and could contain a security interest senior to the Company. Accordingly, the
Company charged the carrying value of the notes receivable to operations during
the year ended December 31, 1999.
Impairment of Long-lived Asset. In connection with the sale of the U.K.
operations and certain other assets of its NMT Neurosciences division on April
5, 2000 (See Note 3(a) of the Notes to Consolidated Financial Statements in the
accompanying financial statements as of December 31, 1999), the Company recorded
at December 31, 1999 a $6.8 million impairment charge for goodwill recorded upon
the acquisition of NMT Neurosciences in July 1998. This impairment charge was
determined based upon the Company's analysis of estimated cash flows of NMT
Neurosciences and the carrying value of all of the long-lived assets of NMT
Neurosciences which were not sold in April 2000. The Company's assessment of the
value of the assets of NMT Neurosciences was corroborated by independent outside
parties.
Equity in Net Loss of Image Technologies Corporation. During the year ended
December 31, 1999 and 1998, the Company recorded $489,000 and $437,000,
respectively, as its equity in the loss of ITC. The carrying value of the note
receivable from ITC has been reduced by these amounts and charged to operations
during the year ended December 31, 1999. See Note 4 of the Notes to
Consolidated Financial Statements in the accompanying financial statements as of
December 31, 1999.
Interest Expense. Interest expense was $2.8 million for the year ended
December 31, 1999 as compared to $1.5 million for the year ended December 31,
1998. The increase was primarily the result of the Company's acquisition of ENI
on July 8, 1998 for which the Company borrowed $20 million of subordinated debt,
which accrues interest at 10.101% per annum. In addition, the amortization of
original issue discount related to the subordinated note of $531,000 and
$293,000 for the years ended December 31, 1999 and 1998, respectively, is
included in interest expense in the statements of operations. See Note 9 of the
Notes to Consolidated Financial Statements in the accompanying Financial
Statements as of December 31, 1999. In April 2000, the Company repaid
approximately $7.3 million of outstanding debt obligations from proceeds
received from the sale of the U.K. operations and certain other assets of the
NMT Neurosciences division. Accordingly, the Company expects interest expense to
decrease in 2000. The Company did not allocate interest expense associated with
the senior secured debt and subordinated notes to discontinued operations.
Interest Income. Interest income was $480,000 for the year ended December 31,
1999 as compared to $1.2 million for the year ended December 31, 1998. The
decrease was due to the Company's lower cash balances as a result of its
financing the acquisition of ENI on July 8, 1998 with cash of $13 million, plus
approximately $3.1 million of acquisition costs.
Extraordinary Loss on Early Extinguishment of Debt. In connection with the
$14 million reduction in September 1999 of its $20 million subordinated note
payable to an affiliate of a significant stockholder of the Company (see Note 9
of the Notes to Consolidated Financial Statements in the accompanying financial
statements as of December 31, 1999), the Company recorded a $2.6 million
extraordinary loss on the early extinguishment of debt in the statement of
operations which primarily relates to the accelerated pro-rata write-off of the
original issue discount and deferred financing costs of the subordinated note
payable.
Provision for Income Taxes. The Company had a provision for income taxes of
$180,000 for the year ended December 31, 1999 which represents the taxes on
income generated in France by NMT Neuroscience. The Company generated a net
operating loss for federal and state income tax purposes in the United States in
the year ended December 31, 1999. The Company had a provision for income taxes
of $745,000 for the year ended December 31, 1998 based on an operating income
before the write-off of in-process research and development expenses of
$4,710,000, the equity in loss of ITC of $437,145 and other nondeductible items
and an estimated effective tax rate of approximately 40%.
Loss on Sale of Discontinued Operations. On April 5, 2000, the Company sold
the U.K. operations and certain other assets of the NMT Neurosciences division,
which consisted primarily of the Selector (R) Ultrasonic Aspirator, Ruggles(TM)
Surgical Instruments and cryosurgery product lines, including certain assets and
liabilities for $12.0 million in cash. The Company recorded a $3.5 million loss
on this sale, comprised of proceeds of $12.0 million less estimated transaction
costs of $3.7 million, and net assets sold of $11.8 million. The transaction
costs consisted principally of legal and accounting fees, severance arrangements
with certain employees and other estimated costs associated with discontinuing
the operation and consummating the sale. Consolidated Financial Statements in
the accompanying Financial Statements as of
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December 31, 1999. Included in the loss on sale are the estimated operating
results of the discontinued operations for the period from January 1, 2000 to
April 1, 2000. The Company has not allocated interest expense to discontinued
operations.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Revenues. Revenues for the year ended December 31, 1998 increased to $25.1
million from $10.1 million for the year ended December 31, 1997. Product sales
increased to $23.0 million for the year ended December 31, 1998 from $8.6
million for the year ended December 31, 1997. The increase is primarily
attributable to the effect of including revenues related to the Company's NMT
Neurosciences division during 1998 as the Company acquired this division on July
8, 1998. Additionally the increase is attributable to increased unit sales of
vena cava filters and CardioSEAL Septal Occluders in the year ended December 31,
1998 as compared with the year ended December 31, 1997.
License fees for the year ended December 31, 1998 amounted to $2.0 million and
consist of milestone payments of $300,000, royalty payments of $1.5 million and
cost-sharing payments received from Boston Scientific of approximately
$200,000. The Company recorded $1.5 million in license fees from Boston
Scientific related to its stent technology in the year ended December 31, 1997,
consisting of $300,000 of milestone payments, $1.0 million of royalty payments,
and $200,000 of cost-sharing payments received from Boston Scientific.
Cost of Product Sales. Cost of product sales increased to $10.8 million for
the year ended December 31, 1998 from $3.8 million for the year ended December
31, 1997. The increase is primarily attributable to the effect of including
cost of product sales related to the Company's acquisition of the products
comprising NMT Neurosciences division. Additionally, the increase is
attributable to increased unit sales of vena cava filters and CardioSEAL Septal
Occluders in the year ended December 31, 1998 as compared with the year ended
December 31, 1997. Cost of product sales, as a percent of product sales,
increased to 47% for the year ended December 31, 1998 from 44% for the year
ended December 31, 1997. This increase is due primarily to the inclusion of the
cost of sales of products of the Company's acquisition of the products
comprising NMT Neurosciences division which have a proportionately higher cost
of product sales than do the vena cava filter and the CardioSEAL Septal
Occluder.
Research and Development. Research and development expense increased to $3.6
million for the year ended December 31, 1998 from $3.0 million for the year
ended December 31, 1997. The increase is primarily attributable to the effect
of including research and development expenses related to the Company's NMT
Neurosciences division during 1998 as the Company acquired this division on July
8, 1998. The increase also reflects increased regulatory and clinical trial
expenses relating to clinical trials of the CardioSEAL Septal Occluder that
commenced in September 1996, as well as for clinical trials related to the
closure of patent foramen ovales (PFO's) and increased activity in the Company's
development programs for vena cava filters and other products under development.
General and Administrative. General and administrative expenses increased to
$5.0 million for the year ended December 31, 1998 from $2.9 million for the year
ended December 31, 1997. The increase is primarily attributable to the effect
of including research and development expenses related to the Company's
acquisition of the products comprising NMT Neurosciences division during 1998 as
the Company acquired this division on July 8, 1998.
Selling and Marketing. Selling and marketing expenses increased to $4.4
million for the year ended December 31, 1998 from $1.0 million for the year
ended December 31, 1997. The increase is primarily attributable to the effect of
including selling and marketing expenses related to the Company's acquisition of
the products comprising NMT Neurosciences division. The increase is also
attributable to increases in marketing activities related to both the CardioSEAL
Septal Occluder in connection with clinical trials and the commencement of
commercial sales of the CardioSEAL Septal Occluder which began in June 1997 in
European and other international markets.
Acquired In-Process Research and Development. For the year ended December 31,
1998, the Company recorded $4.7 million of in-process research and development
expenses related to the Company's acquisition of ENI. See Note 3(b) of the
Notes to Consolidated Financial Statements in the accompanying Financial
Statements as of December 31, 1999. On the date of acquisition, ENI's in-process
research and development value was comprised of five primary research and
development programs that were expected to reach completion between late 1998
and 2000. At the acquisition date, continuing research and development
commitments to complete the projects were expected to be approximately an
aggregate of $2.0 million through 2000 ($680,000, $888,000, and $383,000 in
1998, 1999, and 2000, respectively).
For the year ended December 31, 1997, because of the uncertainty relating to
the Company's realization of its investment in ITC, the Company recorded $2.4
million of in-process research and development expenses related to that
investment. See Note 4 of the Notes to Consolidated Financial Statements in the
accompanying Financial Statements as of December 31, 1999.
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Merger and Integration Charge. As a result of the acquisition of ENI, the
Company reorganized certain of its operations. In connection with this
reorganization, the Company recorded merger and integration charges of $687,000
during the year ended December 31, 1998. See Note 6 of Notes to the
Consolidated Financial Statements in the accompanying Financial Statements as of
December 31, 1999.
Restructuring Charge. During the first half of 1997, the Company reorganized
its vena cava filter operations and brought the assembly of its straight-line
vena cava filters in-house. In connection with this reorganization, the Company
recorded a restructuring charge of $194,000 during the year ended December 31,
1997. See Note 5 of Notes to the Consolidated Financial Statements in the
accompanying Financial Statements as of December 31, 1999.
Equity in Net Loss of Image Technologies Corporation. During the year ended
December 31, 1998, the Company recorded $437,000 as its equity in the loss of
ITC. The carrying value of the note receivable from ITC has been reduced by the
amount of the loss recorded by the Company. See Note 4 of the Notes to
Consolidated Financial Statements in the accompanying Financial Statements as of
December 31, 1999.
Interest Expense. Interest expense was $1.5 million for the year ended
December 31, 1998 as compared to $46,000 for the year ended December 31, 1997.
The increase was primarily the result of the Company's acquisition of ENI on
July 8, 1998 for which the Company borrowed $20 million of subordinated debt,
which accrues interest at 10.101% per annum. In addition, the amortization of
original issue discount related to the subordinated note of $293,000 for the
year ended December 31, 1998 is included in interest expense in the statements
of operations. See Note 9 of the Notes to Consolidated Financial Statements in
the accompanying Financial Statements as of December 31, 1999
Interest Income. Interest income was $1.2 million for the year ended December
31, 1998 as compared to $1.6 million for the year ended December 31, 1997. The
decrease was due to the Company's lower cash balances as a result of its
financing the acquisition of ENI on July 8, 1998 with cash of $13 million, plus
approximately $3.1 million of acquisition costs.
Provision for Income Taxes. The Company had a provision for income taxes of
$745,000 for the year ended December 31, 1998 based on an operating income
before the $4,710,000 write-off of in-process research and development expenses,
the equity in loss of ITC of $437,145 and other nondeductible items and an
estimated effective tax rate of approximately 40%. For the year ended December
31, 1997 the Company had a provision for income taxes of $229,500 which reflects
the non-deductibility of the in-process research and development expenses of
$2,449,000, a portion of the $194,000 restructuring charge recorded in the
period then ended, and the utilization of carry-forward net operating losses
from previous years.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents and marketable securities equal to
$3.5 million at December 31, 1999 as compared to $4.0 million as of December 31,
1998. During year ended December 31, 1999, the Company's operations used cash
of approximately $203,000 which consists of approximately $15 million of cash
used by operations prior to approximately $14 million of noncash charges
and before changes in working capital items.
In July 1998, the Company financed a portion of the acquisition of ENI with
$16.1 million of the Company's cash and a $20 million subordinated note issued
to an affiliate of a significant stockholder of the Company. The subordinated
note is due September 30, 2003 with quarterly interest payable at 10.101% per
annum, The subordinated debt includes certain covenants relating to maintenance
of certain ratios and cash levels. On September 13, 1999, the Company entered
into a $10 million senior secured debt facility with a bank, $8 million of the
proceeds of which was used to reduce the principal amount of the $20 million
subordinated note. The Company also used $6 million of its own cash to further
reduce the principal amount of the $20 million subordinated note. The balance
outstanding under the subordinated note at December 31, 1999 was approximately
$5.2 million. The remaining $2 million of the senior secured debt facility is
available to be drawn down by the Company for working capital purposes, as
needed. The facility has a term of three years with interest payable monthly at
the bank's prime lending rate on U.S. borrowings and an equivalent market rate
on foreign currency borrowings. As of December 31, 1999, the Company was not in
compliance with certain of the debt covenants contained in both the subordinated
note agreement and the senior secured debt agreement. As a result, the Company
negotiated a waiver of default with each of these debtholders. Additionally,
subsequent to year end, the Company used the proceeds from the sale of the U.K.
operations and certain other assets of the NMT Neurosciences division (See Note
3(a) of the Notes to Consolidated Financial Statements in the accompanying
financial statements) to reduce the subordinated note payable and the senior
secured debt by $500,000 and $7.3 million, respectively.
Purchases and capitalized leases of property and equipment for use in the
Company's research and development and general and administrative activities
amounted to $518,000 for the year ended December 31, 1999. The Company also
spent approximately $1.1 million on purchases of property and equipment in 1999
primarily in connection with the Company's implementation of new management
information systems, which was financed through capital lease arrangements.
Additionally the Company has entered into a finance facility agreement with a
bank for borrowings of approximately $475,000 under which borrowings of $428,000
are outstanding as of December 31, 1999. See Note 9(c) of the Notes to
Consolidated Financial Statements in the accompanying financial statements.
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The Company is party to various contractual arrangements including royalty
arrangements and employment and consulting agreements with current employees and
consultants which are likely to increase as additional agreements are entered
into and additional personnel are retained. Subsequent to year-end, Thomas M.
Tully, President and Chief Executive Officer, resigned from the Company. The
amount of his severance of approximately $300,000 will be charged to operations
during the second quarter of 2000.
The Company also has committed to purchase certain minimum quantities of the
vena cava filter from a supplier through June 2001. See Note 10 of Notes to the
Consolidated Financial Statements in the accompanying Financial Statements. All
of these arrangements require cash payments by the Company over varying periods
of time. Certain of these arrangements are cancelable on short notice and
certain require termination or severance payments as part of any early
termination.
The Company may require additional funds for its research and product
development programs, preclinical and clinical testing, operating expenses,
regulatory processes, manufacturing and marketing programs and potential
licenses and acquisitions. Any additional equity financing may be dilutive to
stockholders, and additional debt financing, if available, may involve
restrictive covenants. The Company's capital requirements will depend on
numerous factors, including the sales of its products, the progress of its
research and development programs, the progress of clinical testing, the time
and cost involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights, competing technological and market developments, developments
and changes in the Company's existing research, licensing and other
relationships and the terms of any collaborative, licensing and other similar
arrangements that the Company may establish.
Euro Conversion
On January 1, 1999, eleven of the fifteen member countries of the European
Union adopted the "euro" as their national currency unit and irrevocably
established fixed conversion rates between their existing sovereign currencies
and the euro. During the three-year transition period between January 1, 1999
and January 1, 2002, the euro will be a "cashless" currency, existing only as a
unit of account. Payments made to accounts in these member states may be made
either in the denominated legacy currency unit of the account or in euros.
Beginning on January 1, 2002, euro banknotes and coins will be introduced, and
legacy currency banknotes and coins will be withdrawn from circulation. No
later than July 1, 2002, the euro will be the sole national currency unit in
these member states, and the legacy currency banknotes and coins will no longer
be accepted as legal tender.
The Company conducts a substantial portion of its business within the member
countries of the European Union, and accordingly its existing systems are
generally capable of accommodating multiple currencies, including the euro.
The Company is assessing the potential impact from the euro conversion in a
number of areas, including the following: (1) the competitive impact of cross-
border price transparency, which may make it more difficult for businesses to
charge different prices for the same products on a country-by-country basis; (2)
the impact on currency exchange costs and currency exchange rate risk; and (3)
the impact on existing contracts.
As of December 31, 1999, the impact of the euro conversion has not had a
material impact on the operations of the Company.
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CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The following important factors, among others, could cause actual results
to differ materially from those contained in forward-looking statements made in
this Annual Report on Form 10-K and presented elsewhere by management from time
to time.
WE HAVE HISTORICALLY FAILED TO MEET COVENANTS IN OUR LOAN AGREEMENTS AND MAY
FACE DIFFICULTIES IN MEETING THEM IN THE FUTURE.
We financed a significant portion of the acquisition of our neurosurgical
instruments business with $20 million of subordinated debt borrowed from an
affiliate of J.H. Whitney & Co., one of our significant stockholders.
Subsequently, we entered into a $10 million senior secured debt facility with
Brown Brothers Harriman & Co. In connection with this refinancing, we
negotiated covenants relating to the operation of our business. As of December
31, 1999, we were not in compliance with certain of the debt covenants. In
connection with our recent sale of a portion of the neurosurgical instruments
business, we obtained a waiver of default from each lender. Although we believe
that we will be able to satisfy the covenants as modified, our failure to meet
our financial plan could result in our breach of certain of the covenants. If we
breach any of these covenants and are not successful in obtaining a waiver,
either noteholder could demand immediate repayment of the note. In addition, in
the event of a breach of certain of the covenants, the interest rate we owe in
connection with the debt may increase. We may seek to refinance this debt. We
cannot be certain that we will be able to refinance on terms that are favorable
to us or at all.
WE MAY FACE DIFFICULTIES IN SATISFYING OUR FUTURE CAPITAL REQUIREMENTS.
In the event that we are unable to obtain access to additional capital on
terms that are favorable to us or at all, we may fail to meet our financial
plan. Moreover, our failure to meet our financial plan could result in our
breach of certain debt covenants. Our capital requirements will depend on a
number of factors, including:
. product sales;
. progress of research and development programs and preclinical and
clinical testing;
. cost and time involved in obtaining regulatory approvals, and cost of
filing; prosecuting, defending and enforcing patent claims and other
intellectual property rights; and
. unanticipated needs for capital, such as, a successful claim for
indemnification by the buyer of our neurosurgical instruments business
against us under the purchase agreement.
WE FACE CHALLENGES IN REFOCUSING OUR BUSINESS STRATEGY.
In connection with the commercialization of our CardioSEAL product and the
recent sale of a portion of our neurosurgical instruments business, we have had
to refocus our business strategy. This refocusing has placed significant demands
on management and other resources. Our future success will depend on our ability
to manage and implement our refocused business strategy effectively, including
by:
. developing and improving our operational, financial and other internal
systems;
. improving our sales and marketing capabilities; and
. continuing to train, motivate and manage our employees.
WE FACE UNCERTAINTIES WITH RESPECT TO COMMERCIALIZATION, PRODUCT DEVELOPMENT AND
MARKET ACCEPTANCE OF OUR PRODUCTS.
Before certain of our products can be marketed and sold in the United
States, including our CardioSEAL product, we may be required to conduct further
research, product development, preclinical and clinical testing and obtain
additional governmental regulatory approvals. We cannot be certain that our
current products, or products currently under development, will achieve or
continue to have market acceptance. Certain of the medical indications that can
be treated by our devices can also be treated by surgery, drugs or other medical
devices. Currently, the medical community widely accepts many alternative
treatments, and these other treatments have a long history of use. We cannot be
certain that our devices and procedures will be able to replace such established
treatments or that either physicians or the medical community, in general, will
accept and utilize our devices or any other medical products that we may
develop. In addition, our future success depends, in part, on our ability to
develop additional products. Even if we determine that a product candidate has
medical benefits, the cost of commercializing that product candidate may be too
high to justify development. In addition, competitors may develop products that
are more effective, cost less or are ready for commercial introduction before
our products. If we are unable to develop additional, commercially viable
products, our future prospects will be limited.
21
<PAGE>
WE MAY BE UNABLE TO COMPETE SUCCESSFULLY BECAUSE OF INTENSE COMPETITION AND
RAPID TECHNOLOGICAL CHANGE IN OUR INDUSTRY.
The medical device industry is characterized by rapidly evolving technology
and intense competition. Existing and future products, therapies, technological
approaches and delivery systems will continue to compete directly with our
products. Many of our competitors have substantially greater capital resources,
greater research and development, manufacturing and marketing resources and
experience and greater name recognition than we do. In addition, new surgical
procedures and medications could be developed that replace or reduce the
importance of current or future procedures that utilize our products. As a
result, any products that we develop may become obsolete before we recover any
expenses incurred in connection with development of these products.
OUR FUTURE SUCCESS MAY DEPEND IN PART UPON MAINTENANCE OF BUSINESS RELATIONSHIPS
WITH COLLABORATORS.
We have entered into distribution agreements with Bard Radiology and Bard
International granting them exclusive distribution rights to our SNF, and into a
license agreement with Boston Scientific granting Boston Scientific exclusive
worldwide rights to develop, manufacture, market and distribute our stent
technology, along with products incorporating such technology. Although Bard
Radiology and Bard International have agreed not to sell competing filters,
Boston Scientific is not prohibited from selling other stents and, in fact,
manufactures and licenses from others a variety of stents that may compete with
our stents. Boston Scientific may choose to emphasize such other stents in its
developmental and marketing efforts. We cannot be certain that our arrangements
will be renewed or that our existing relationships with Bard Radiology, Bard
International or Boston Scientific will continue in their current form. Our
business could be materially adversely affected if these arrangements prove
unsuccessful or if these companies terminate their arrangements with us,
negotiate lower prices, sell additional competing products, whether manufactured
by themselves or others, or otherwise alter the nature of their relationships
with us.
OUR LIMITED MANUFACTURING HISTORY, DEPENDENCE ON THIRD PARTY MANUFACTURERS AND
THE POSSIBILITY OF NON-COMPLIANCE WITH MANUFACTURING REGULATIONS RAISE
UNCERTAINTIES WITH RESPECT TO OUR ABILITY TO COMMERCIALIZE FUTURE PRODUCTS.
We use third parties to manufacture and distribute certain of our products.
If our third party manufacturers experience delays or difficulties in producing,
packaging or distributing our products, market introduction and subsequent sales
of such products would be adversely affected, and we might have to seek
alternative sources of supply. We cannot be certain that we will be able to
enter into alternative supply arrangements at commercially acceptable rates, if
at all. If we are unable to obtain or retain third party manufacturers on
commercially acceptable terms, we may not be able to commercialize medical
products as planned.
The FDA and other regulatory authorities require that our products be
manufactured according to rigorous standards including, but not limited to, Good
Manufacturing Practice and ISO 9000. These regulatory requirements may
significantly increase our production or purchasing costs and may even prevent
us from making or obtaining our products in amounts sufficient to meet market
demand. If we, or a third party manufacturer, change our approved manufacturing
process, the FDA will require a new approval before that process could be used.
Failure to develop our manufacturing capabilities may mean that even if we
develop promising new products, we may not be able to produce them profitably,
as a result of delays and additional capital investment costs.
WE MAY BE UNABLE TO SUCCESSFULLY MARKET OUR PRODUCTS DUE TO LIMITED MARKETING
AND SALES EXPERIENCE.
Our neurosurgical implants and septal repair devices are generally marketed
directly through our direct sales force. Because we have marketed our older
products through third parties, we have limited experience marketing our
products. In order to market directly the CardioSEAL Septal Occluder and any
related products, we will have to develop a marketing and sales organization
with technical expertise and distribution capabilities.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND MAY FACE
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS.
Our success will depend, in part, on our ability to obtain patents,
maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. We cannot be certain that:
. any pending patent applications or any future patent application will
result in issued patents;
. the scope of any patent protection will exclude competitors or provide
competitive advantages to us;
. any of our patents will be held valid if subsequently challenged; or
. others will not claim rights in or ownership of the patents and other
proprietary rights held by us.
Furthermore, we cannot be certain that others have not or will not develop
similar products, duplicate any of our products or design around any patents
issued or that may be issued in the future to us or to our licensors. Whether
or not patents are issued to us or to our licensors, others may hold or receive
patents which contain claims having a scope that covers products developed by
us. We could incur substantial costs in defending any patent infringement suits
or in asserting any patent rights, including those granted by
22
<PAGE>
third parties. In addition, we may be required to obtain licenses to patents or
proprietary rights from third parties. There can be no assurance that such
licenses will be available on acceptable terms, if at all.
AS A RESULT OF GOVERNMENT REGULATIONS, WE MAY EXPERIENCE LOWER SALES AND
EARNINGS.
The manufacture and sale of medical devices intended for commercial
distribution are subject to extensive governmental regulations in the United
States. Medical devices generally require pre-market clearance or pre-market
approval prior to commercial distribution. Certain material changes or
modifications to medical devices are also subject to regulatory review and
clearance or approval. The regulatory approval process is expensive, uncertain
and lengthy. If granted, the approval may include significant limitations on
the indicated uses for which a product may be marketed. In addition, any
products that we manufacture or distribute are subject to continuing regulation
by the FDA. We cannot be certain that we will be able to obtain necessary
regulatory approvals or clearances for our products on a timely basis or at all.
The occurrence of any of the following events could have a material adverse
effect on our business, financial condition and results of operations:
. delays in receipt of, or failure to receive, regulatory approvals or
clearances;
. the loss of previously received approvals or clearances;
. limitations on the intended use of a device imposed as a condition of
regulatory approvals or clearances; or
. our failure to comply with existing or future regulatory requirements.
In addition, sales of medical device products outside the United States are
subject to foreign regulatory requirements that vary widely from country to
country. Failure to comply with foreign regulatory requirements also could have
a material adverse effect on our business, financial condition and results of
operations.
WE FACE UNCERTAINTIES WITH RESPECT TO THE AVAILABILITY OF THIRD PARTY
REIMBURSEMENT.
In the United States, Medicare, Medicaid and other government insurance
programs, as well as private insurance reimbursement programs, greatly affect
revenues for suppliers of health care products and services. Such third party
payors may affect the pricing or relative attractiveness of our products by
regulating the maximum amount, if any, of reimbursement which they provide to
the physicians and clinics using our devices, or any other products that we may
develop. If, for any reason, the third party payors decided not to provide
reimbursement for our products, this would materially adversely affect our
ability to sell our products. Moreover, mounting concerns about rising health
care costs may cause the government or private insurers to implement more
restrictive coverage and reimbursement policies in the future. In the
international market, reimbursement by private third party medical insurance
providers and by governmental insurers and providers varies from country to
country. In certain countries, our ability to achieve significant market
penetration may depend upon the availability of third party governmental
reimbursement.
WE MAY NOT HAVE SUCCESSFULLY REDESIGNED THE CLAMSHELL SEPTAL REPAIR DEVICE.
Between 1989 and 1991, Bard sponsored trials of an earlier version of the
septal repair device, known as the Clamshell. In 1991, Bard discovered
fractures of the stainless steel framework in certain of the devices implanted
during such clinical trials and, following such discovery, suspended its
clinical trials worldwide except for patients whose status of being at high risk
for surgery made their use of the Clamshell particularly necessary. We
determined that the fractures were caused by "metal fatigue", resulting from
higher than anticipated forces acting on the Clamshell. Our redesign efforts
resulted in the design of the current version of the septal repair device.
Although the CardioSEAL Septal Occluder has undergone in vitro testing and has
obtained limited humanitarian use designation by the FDA, we cannot be certain
that such testing accurately simulates the actual forces in the human body or
that similar fractures will not occur with the CardioSEAL Septal Occluder. If
such fractures occur with adverse clinical consequences, our efforts to
commercialize the CardioSEAL Septal Occluder may be significantly delayed, as we
may be required to invest significant resources in further design and
engineering of the device, or we may even have to discontinue development
efforts.
PRODUCT LIABILITY CLAIMS, PRODUCT RECALLS AND UNINSURED OR UNDERINSURED
LIABILITIES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
The testing, marketing and sale of implantable devices and materials carry
an inherent risk that users will assert product liability claims against us or
our third party distributors. In these lawsuits, users might allege that their
use of our devices had adverse effects on their health. A product liability
claim or a product recall could have a material adverse effect on our business,
financial condition and results of operations. Certain of our devices are
designed to be used in life-threatening situations where there is a high risk of
serious injury or death. Although we currently maintain limited product
liability insurance coverage, we cannot be certain that in the future we will be
able to maintain such coverage on acceptable terms or that current insurance or
insurance subsequently obtained will provide adequate coverage against any or
all potential claims. Furthermore, we cannot be certain that we will avoid
significant product liability claims and the attendant adverse publicity. Any
product liability claim or other claim with respect to
23
<PAGE>
uninsured or underinsured liabilities could have a material adverse effect on
our business, financial condition, and results of operations.
INTENSE INDUSTRY COMPETITION FOR QUALIFIED EMPLOYEES THREATENS OUR ABILITY TO
ATTRACT AND RETAIN NECESSARY, QUALIFIED PERSONNEL.
In the medical device field, there is intense competition for qualified
personnel, and we cannot be assured that we will be able to continue to attract
and retain the qualified personnel necessary for the development of our
business. Both the loss of the services of existing personnel as well as the
failure to recruit additional qualified scientific, technical and managerial
personnel in a timely manner would be detrimental to our anticipated growth and
expansion into areas and activities requiring additional expertise such as
marketing. The failure to attract and retain such personnel could adversely
affect the our business.
ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is subject to market risk in the form of interest rate risk and
foreign currency risk. Interest rate risk is immaterial to the Company. As an
international concern, the Company faces exposure to adverse movements in
foreign currency exchange rates. These exposures may change over time and could
have a material adverse impact on the Company's financial condition and results
of operations. The Company's most significant foreign currency exposures relate
to the United Kingdom and France, as a result of its manufacturing activities
and assets in those countries. The accounts of the Company's foreign
subsidiaries are translated in accordance with SFAS No. 52, Foreign Currency
Translation. In translating the accounts of the foreign subsidiaries into U.S.
dollars, assets and liabilities are translated at the rate of exchange in effect
at the end of each reporting period, while stockholders' equity is translated at
historical rates. Revenue and expense accounts are translated using the
weighted average exchange rate in effect during the year. The Company's foreign
currency transaction gains or losses are included in the accompanying
consolidated statements of operations and amounted to a foreign currency
transaction gain of $105,000 for the year ended December 31, 1999 as compared
with a foreign currency transaction loss of $88,000 for the year ended December
31, 1998. The Company records the effects of changes in balance sheet items
(i.e., cumulative foreign currency translation gains and losses) as a component
of consolidated stockholders' equity.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
All financial statements required to be filed hereunder are filed as
Appendix A hereto, are listed under Item 14(a) and are incorporated herein by
this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
24
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this Item is contained in part under the caption "Executive
Officers of the Company" in Part I of this Annual Report on Form 10-K and in
part in the Company's Proxy Statement for the 2000 Annual Meeting of
Stockholders to be held on June 1, 2000 (the "2000 Proxy Statement") under the
caption "Proposal 1 -- Election of Directors," which section is incorporated
herein by this reference.
Officers are elected on an annual basis and serve at the discretion of the
Board.
The information required by this Item regarding compliance with Section
16(a) of the Securities Exchange Act of 1934, as amended, is contained in the
2000 Proxy Statement under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" and is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The response to this Item is contained in the 2000 Proxy Statement under
the caption "Proposal 1 -- Election of Directors," which section is incorporated
herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this Item is contained in the 2000 Proxy Statement under
the caption "Stock Ownership of Certain Beneficial Owners and Management," which
section is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this Item is contained in the 2000 Proxy Statement under
the caption "Certain Transactions," which section is incorporated herein by this
reference.
25
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements. The following documents are filed as Appendix A
--------------------
hereto and are included as part of this Annual Report on Form 10-K:
Financial Statements of NMT Medical, Inc.:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
(b) Financial Statement Schedules. The Company is not filing any financial
-----------------------------
statement schedules as part of this Annual Report on Form 10-K because such
schedules are either not applicable or the required information is included in
the financial statements or notes thereto.
(c) Exhibits. The exhibits filed as part of this Annual Report on
--------
Form 10-K are listed in the Exhibit Index immediately preceding such exhibits,
and are incorporated herein by this reference. The Company has identified with
asterisks in the Exhibit Index each management contract and compensation plan
filed as an exhibit to this Annual Report on Form 10-K in response to Item 14(c)
of Form 10-K.
(d) Reports on Form 8-K. The Company did not file any Reports on Form 8-K
-------------------
during the fiscal quarter ended December 31, 1999.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NMT MEDICAL, INC.
By: /s/ C. Leonard Gordon
____________________________________________
C. Leonard Gordon
Acting President and Chief Executive Officer
Dated: April 13, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ C. Leonard Gordon Acting President and Chief Executive April 13, 2000
______________________ Officer and Director (Principal
C. Leonard Gordon Executive Officer)
/s William J. Knight Vice President of Finance and April 13, 2000
______________________ Administration and Chief
William J. Knight Financial Officer (Principal
Financial and Accounting Officer)
/s/ R. John Fletcher Director April 13, 2000
______________________
R. John Fletcher
/s/ Jeffrey R. Jay, M.D. Director April 13, 2000
______________________
Jeffrey R. Jay, M.D.
/s/ Morris Simon, M.D. Director April 13, 2000
______________________
Morris Simon, M.D.
/s/ Robert A. Van Tassel, M.D.
_______________________ Director April 13, 2000
Robert A. Van Tassel, M.D.
/s/ Jeffrey F. Thompson Director April 13, 2000
_______________________
Jeffrey F. Thompson
</TABLE>
<PAGE>
Appendix A
----------
NMT MEDICAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
NMT MEDICAL, INC. AND SUBSIDIARIES:
<TABLE>
<S> <C>
Report of Independent Public Accountants................................... A-2
Consolidated Balance Sheets as of December 31, 1999 and 1998............... A-3
Consolidated Statements of Operations for the Years Ended December 31,
1999, 1998, and 1997.................................................. A-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 1998, and 1997..................................... A-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1999, 1998, and 1997.................................................. A-6
Notes to Consolidated Financial Statements................................. A-7
</TABLE>
A-1
<PAGE>
Report of Independent Public Accountants
To NMT Medical, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of NMT Medical,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1999 and 1998
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NMT Medical, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ Arthur Andersen LLP
Boston, Massachusetts
April 5, 2000
A-2
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
At December 31,
------------------------
1999 1998
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,533,475 $ 4,007,014
Marketable securities -- 5,113,537
Accounts receivable, net of allowances
for doubtful accounts of $913,000 and
$871,000 in 1999 and 1998, respectively 7,900,099 10,273,861
Inventories 4,634,348 5,283,432
Prepaid expenses and other current assets 2,429,016 3,308,610
------------ -----------
Total current assets 18,496,938 27,986,454
------------ -----------
Property, plant and equipment, at cost:
Land and Buildings 4,650,000 4,650,000
Leasehold improvements 3,154,763 3,469,063
Laboratory and computer equipment 2,583,691 2,209,252
Equipment under capital lease 2,258,982 1,144,982
Office furniture and equipment 893,199 1,203,953
------------ -----------
13,540,635 12,677,250
Less--Accumulated depreciation and
amortization 2,522,588 939,102
------------ -----------
11,018,047 11,738,148
------------ -----------
Long-term investments in marketable
securities -- 1,009,401
Notes receivable from Image Technologies
Corporation -- 1,600,898
Goodwill and other intangible assets -- 6,975,010
Other assets 839,733 1,128,218
Net assets from discontinued operations 8,392,448 13,277,000
------------ -----------
$ 38,747,166 $63,715,129
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,100,081 $ 6,226,190
Accrued expenses 4,629,366 4,215,500
Current portion of long-term debt
obligations 1,002,877 202,248
------------ -----------
Total current liabilities 9,732,324 10,643,938
------------ -----------
Long-term debt obligations, net of current
portion 13,570,355 17,544,743
Deferred tax liability 1,283,008 1,357,808
Commitments (Note 10)
Stockholders' equity:
Preferred stock, $.001 par value--
Authorized--3,000,000 shares
Issued and outstanding--none -- --
Common stock, $.001 par value--
Authorized--30,000,000 shares
Issued and outstanding--10,783,278 and
10,680,117 shares in 1999 and 1998,
respectively 10,784 10,681
Additional paid-in capital 41,439,959 40,999,277
Cumulative translation adjustment (708,253) 687,000
Accumulated deficit (26,581,011) (7,528,318)
------------ -----------
Total stockholders' equity 14,161,479 34,168,640
------------ -----------
$ 38,747,166 $63,715,129
============ ===========
</TABLE>
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
A-3
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Product sales $ 32,948,584 $23,023,287 $ 8,564,810
License fees and royalties 2,130,539 2,028,973 1,500,000
Product development 245 1,453 60,898
------------ ----------- -----------
35,079,368 25,053,713 10,125,708
------------ ----------- -----------
Expenses:
Cost of product sales 15,215,081 10,819,003 3,765,235
Research and development 4,462,359 3,639,728 2,973,755
General and administrative 9,050,244 5,043,872 2,873,477
Selling and marketing 8,427,357 4,390,739 1,010,123
Write-down of note receivable from Image
Technologies Corporation 1,364,369 -- --
Impairment of long-lived asset 6,801,000 -- --
Acquired in-process research and development -- 4,710,000 2,449,071
Merger and integration charge -- 687,242 --
Restructuring charge -- -- 193,636
------------ ----------- -----------
45,320,410 29,290,584 13,265,297
------------ ----------- -----------
Loss from operations (10,241,042) (4,236,871) (3,139,589)
Equity in net loss of Image Technologies Corporation (488,529) (437,145) --
Currency transaction gain (loss) 104,625 (87,596) (14,672)
Interest expense (2,814,211) (1,461,346) (46,152)
Interest income 479,617 1,168,056 1,591,922
------------ ----------- -----------
(2,718,498) (818,031) 1,531,098
------------ ----------- -----------
Loss before provision for income taxes (12,959,540) (5,054,902) (1,608,491)
Extraordinary loss on early extinguishment of debt (2,618,428) -- --
Provision for income taxes 180,000 744,538 229,500
------------ ----------- -----------
Net loss from continuing operations (15,757,968) (5,799,440) (1,837,991)
------------ ----------- -----------
Discontinued Operations:
Net income from discontinued operations, net
of income taxes of $265,000 and $142,000
during the years ended December 31, 1999
and 1998, respectively 236,827 2,120,000 --
Loss on sale of discontinued operations (3,531,552) -- --
------------ ----------- -----------
Net (loss) gain from discontinued operations (3,294,725) 2,120,000 --
------------ ----------- -----------
Net Loss $(19,052,693) $(3,679,440) $(1,837,991)
============ =========== ===========
Basic and diluted net (loss) gain per common share:
Continuing operations $(1.47) $(.57) $(.19)
Discontinued operations (.31) .21 --
------------ ----------- -----------
Net loss $(1.77) $(.36) $(.19)
============ =========== ===========
Basic and diluted weighted average common shares outstanding 10,751,070 10,192,663 9,595,969
============ =========== ===========
</TABLE>
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
A-4
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock
-------------------- --------------------- Additional
Number $.001 Number $.001 Paid-in Accumulated
of Shares Par Value of Shares Par Value Capital Deficit
--------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 -- $ -- 9,435,922 $ 9,437 $35,321,821 $ (2,010,887)
Exercise of common stock options -- -- 322,485 322 535,706 --
Exercise of warrants -- -- 64,779 65 275,894 --
Compensation relating to
acceleration of vesting of
common stock options -- -- -- -- 111,576 --
Tax benefit related to exercise
of common stock options -- -- -- -- 366,000 --
Net loss -- -- -- -- -- (1,837,991)
--------- --------- ---------- ------- ----------- ------------
Total comprehensive loss
Balance, December 31, 1997 -- -- 9,823,186 9,824 36,610,997 (3,848,878)
Common stock issued under
the employee stock purchase
plan -- -- 11,972 12 69,221 --
Common stock issued as a finders'
fee in connection with the
acquisition of Elekta
Neurosurgical Instruments -- -- 113,793 114 659,885 --
Common stock issued for original
issue discount on subordinated
debt -- -- 561,207 561 3,254,440 --
Exercise of common stock options -- -- 169,959 170 303,055 --
Compensation relating to
acceleration of vesting of
common stock options -- -- -- -- 11,679 --
Cumulative translation adjustment -- -- -- -- -- --
Tax benefit related to exercise
of common stock options -- -- -- -- 90,000 --
Net loss -- -- -- -- -- (3,679,440)
--------- --------- ---------- ------- ----------- ------------
Total comprehensive loss
Balance, December 31, 1998 -- -- 10,680,117 10,681 40,999,277 (7,528,318)
Common stock issued under the
employee stock purchase plan -- -- 22,461 22 59,104 --
Common stock warrants issued in
connection with debt waivers -- -- -- -- 128,600 --
Exercise of common stock options -- -- 80,700 81 106,978 --
Compensation expense related to
nonemployee stock options -- -- -- -- 146,000 --
Cumulative translation
adjustment -- -- -- -- -- --
Net loss -- -- -- -- -- (19,052,693)
--------- --------- ---------- ------- ----------- ------------
Total comprehensive loss
Balance, December 31, 1999 -- $ -- 10,783,278 $10,784 $41,439,959 $(26,581,011)
========= ========= ========== ======= =========== ============
</TABLE>
Consolidated Statements of Stockholders' Equity - (continued)
<TABLE>
<CAPTION>
Cumulative Total
Translation Stockholders' Comprehensive
Adjustment Equity Loss
---------- ------ ----
<S> <C> <C> <C>
Balance, January 1, 1997 $ -- $ 33,320,371 $ --
Exercise of common stock options -- 536,028 --
Exercise of warrants -- 275,959 --
Compensation relating to
acceleration of vesting of
common stock options -- 111,576 --
Tax benefit related to exercise
of common stock options -- 366,000 --
Net loss -- (1,837,991) (1,837,991)
----------- ------------ ------------
Total comprehensive loss (1,837,991)
============
Balance, December 31, 1997 -- 32,771,943 --
Common stock issued under
the employee stock purchase
plan -- 69,233 --
Common stock issued as a finders'
fee in connection with the
acquisition of Elekta
Neurosurgical Instruments -- 659,999 --
Common stock issued for origninal
issue discount on subordinated
debt -- 3,255,001 --
Exercise of common stock options -- 303,225 --
Compensation relating to
acceleration of vesting of
common stock options -- 11,679 --
Cumulative translation adjustment 687,000 687,000 687,000
Tax benefit related to exercise
of common stock options -- 90,000 --
Net loss -- (3,679,440) (3,679,440)
----------- ------------ ------------
Total comprehensive loss (2,992,440)
============
Balance, December 31, 1998 687,000 34,168,640
Common stock issued under the
employee stock purchase plan -- 59,126 --
Common stock warrants issued in
connection with debt waivers -- 128,600 --
Exercise of common stock options -- 107,059 --
Compensation expense related to
extension of stock options vesting -- 146,000 --
Cumulative translation
adjustment (1,395,253) (1,395,253) (1,395,253)
Net loss -- (19,052,693) (19,052,693)
----------- ------------ ------------
Total comprehensive loss $(20,447,946)
============
Balance, December 31, 1999 $ (708,253) $ 14,161,479
=========== ============
</TABLE>
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
A-5
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(19,052,693) $ (3,679,440) $(1,837,991)
Net (gain) loss from discontinued operations 3,294,725 (2,120,000) --
------------ ------------ -----------
Net loss from continuing operations $(15,757,968) $ (5,799,440) $(1,837,991)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities--
Acquired in-process research and development -- 4,710,000 2,449,071
Noncash warrant issuance 128,600 -- --
Equity in loss of Image Technologies Corporation 488,529 437,145 --
Expense recorded on acceleration and extension of stock options vesting 146,000 11,679 111,576
Depreciation and amortization 2,067,395 1,391,088 461,141
Noncash tax provision 180,000 674,000 --
Noncash interest expense relating to original issue discount 531,264 215,490 --
Noncash interest expense relating to early extinguishment of debt 2,358,970 -- --
Write-down of note receivable from Image Technologies Corporation 1,364,369 -- --
Impairment of long-lived asset 6,801,000 -- --
Increase in accounts receivable reserves 42,000 596,000 --
Deferred tax benefit (74,800) (1,019,692) --
Changes in assets and liabilities--
Accounts receivable 2,078,314 (2,582,685) (1,535,178)
Inventories 579,357 2,745,588 (325,288)
Prepaid expenses and other current assets 794,478 700,406 (500,254)
Accounts payable (1,821,804) (1,046,530) (254,176)
Accrued expenses (109,147) 2,714,238 673,966
Deferred revenue -- (300,000) 300,000
------------ ------------ -----------
Net cash (used in) provided by continuing operations (203,443) 3,447,287 (457,133)
------------ ------------ -----------
Net cash used in discontinued operations 1,589,828 (4,654,000) --
------------ ------------ -----------
Cash flows from investing activities:
Maturities (purchases) of marketable securities and
long-term investments 6,122,938 16,167,143 4,056,855
Purchases of property, plant and equipment (518,000) (193,432) (272,380)
Increase in other assets (497,213) (636,238) (81,855)
Increase in investment in Image Technologies Corporation -- (2,038,043) --
Cash paid for acquisition of Image Technologies Corporation,
net of cash acquired -- -- (2,449,071)
Cash paid for acquisition of Elekta Neurosurgical Instruments,
net of cash acquired -- (32,721,076) --
------------ ------------ -----------
Net cash provided by (used in) investing activities 5,107,725 (19,421,646) 1,253,549
------------ ------------ -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 107,059 303,225 811,986
Proceeds from issuance of common stock pursuant to employee
stock purchase plan 59,126 69,233 --
(Payments of)/proceeds from subordinated notes payable (14,000,000) 20,000,000 --
Borrowings under financing arrangements 428,000 -- --
Proceeds from secured notes payable, net 7,279,134 -- --
Cash paid for deferred financing costs -- (852,849) --
Payments of bank debt -- (523,000) --
Payments of capital lease obligations (252,816) (190,519) (129,443)
------------ ------------ -----------
Net cash (used in) provided by financing activities (6,379,497) 18,806,090 682,543
------------ ------------ -----------
Effect of exchange rate changes on cash (588,152) 267,838 --
Net (decrease) increase in cash and cash equivalents (473,539) (1,554,431) 1,478,959
Cash and cash equivalents, beginning of period 4,007,014 5,561,445 4,082,486
------------ ------------ -----------
Cash and cash equivalents, end of period $ 3,533,475 $ 4,007,014 $ 5,561,445
============ ============ ===========
</TABLE>
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
A-6
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) OPERATIONS
NMT Medical, Inc. (formerly Nitinol Medical Technologies, Inc.) (the Company)
designs, develops and markets innovative medical devices that utilize advanced
technologies and are delivered by minimally invasive procedures. The
Company's products are designed to offer alternative approaches to existing
complex treatments, thereby reducing patient trauma, shortening procedure,
hospitalization and recovery times and lowering overall treatment costs. The
Company's patented medical devices include self-expanding stents, vena cava
filters and septal repair devices (the CardioSeal Septal Occluder). The
Company's stents have been commercially launched in Europe and in the United
States (U.S.) for certain indications, its vena cava filters are marketed in
the U.S. and abroad and the CardioSEAL Septal Occluder is sold commercially in
the U.S. for certain humanitarian uses only, and in Europe and other
international markets. Through its NMT Neurosciences division, the Company
develops, manufactures, markets and sells specialty implants and instruments
for neurosurgery including cerebral spinal fluid shunts, the Spetzler Titanium
Aneurysm Clip and endoscopes and instrumentation for minimally invasive
surgery. On April 5, 2000, the Company sold the U.K. operations of its NMT
Neurosciences division including the Selector Ultrasonic Aspirator, Ruggles
Surgical Instruments and cryosurgery product lines, including certain assets
and liabilities, for approximately $12.0 million cash (see Note 3(a)). The
results of these discontinued operations have been included in the
accompanying financial statements for the years ended December 31, 1999 and
1998.
As of December 31, 1999, the Company was not in compliance with certain of the
debt covenants contained in both the subordinated note agreement and the
senior secured debt agreement discussed in Notes 9(a) and 9(b). The Company
obtained a waiver of default with each of these debtholders and also
subsequently paid down approximately $7.8 million of this debt from the
proceeds of the sale of the U.K. operations of NMT Neurosciences.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All intercompany transactions
and balances have been eliminated in consolidation.
A-7
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(b) Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the reported
amounts of revenues and expenses during the reporting periods and disclosure
of contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.
(c) Cash and Cash Equivalents, Marketable Securities and Long-Term
Investments in Marketable Securities
The Company considers all investments with maturities of 90 days or less from
the date of purchase to be cash equivalents and all investments with original
maturity dates greater than 90 days to be marketable securities. Marketable
securities are classified as current or long-term based on their remaining
maturity as of the balance sheet date.
In accordance with Statement of Financial Accounting Standards (SFAS) No.
115, Accounting for Certain Investments in Debt and Equity Securities, the
Company has classified certain of its marketable securities as held-to-
maturity and available-for-sale and its long-term investments in marketable
securities as held-to-maturity. Held-to-maturity securities represent those
securities for which the Company has the intent and ability to hold to
maturity and are reported at amortized cost. Available-for-sale securities
represent those securities that do not meet the classification of held-to-
maturity, are not actively traded and are reported at fair market value with
unrealized gains and losses included in stockholders' equity. There were no
unrealized gains or losses as of December 31, 1999 or 1998.
Cash and cash equivalents, which are carried at cost and approximate market,
consist of cash and money market accounts.
A-8
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(c) Cash and Cash Equivalents, Marketable Securities and Long-Term
Investments in Marketable Securities--(continued)
Marketable securities, with a weighted average maturity of approximately
7 1/2 months at December 31, 1998, consist of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Held-to-maturity--
Eurodollar bonds $ -- $3,310,627
Corporate debt securities -- 502,063
Medium term notes -- 500,847
Commercial paper -- --
Zero coupon bonds -- --
---------- ----------
-- 4,313,537
Available-for-sale--
Taxable auction securities -- 800,000
---------- ----------
$ -- $5,113,537
---------- ==========
</TABLE>
There were no realized gains or losses on the sale of available-for-sale
securities during 1999 and 1998.
Long-term investments in marketable securities, with a weighted average
maturity of approximately 15 months at December 31, 1998, are carried at
cost, which approximates market, and consist of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Held-to-maturity--
Medium-term notes $ -- $1,009,401
Corporate debt securities -- --
---------- ----------
$ -- $1,009,401
---------- ==========
</TABLE>
A-9
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(c) Cash and Cash Equivalents, Marketable Securities and Long-Term
Investments in Marketable Securities--(continued)
In addition, the following amounts of interest receivable generated from the
Company's cash and cash equivalents, marketable securities, and long-term
investments in marketable securities are included in prepaid expenses and
other current assets in the accompanying consolidated balance sheets:
<TABLE>
<CAPTION>
AT DECEMBER 31,
1999 1998
--------------------- -------------------
<S> <C> <C>
Short-term interest receivable $ -- $117,687
Long-term interest receivable -- 12,985
----- --------
$ -- $130,672
----- ========
</TABLE>
(d) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31,
1999 1998
------------------ -----------------
<S> <C> <C>
Components $2,379,474 $2,617,848
Finished goods 2,254,874 2,665,584
---------- ----------
$4,634,348 $5,283,432
========== ==========
</TABLE>
Finished goods consist of materials, labor and manufacturing overhead.
(e) Financial Instruments
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires
disclosure of an estimate of the fair value of certain financial instruments.
The Company's financial instruments consist of cash and cash equivalents,
marketable securities, long-term investments in marketable securities,
accounts receivable and debt obligations. The estimated fair value of these
financial instruments approximates their carrying value at December 31, 1999
and 1998, respectively. The estimated fair values have been determined
through information obtained from market sources and management estimates.
A-10
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(e) Financial Instrument--(continued)
The Company does not have any material derivative or any other financial
instruments as defined by SFAS No. 119, Disclosure About Derivative Financial
Instruments and Fair Value of Financial Instruments.
(f) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information about Financial Instruments with Off-
Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosure of any significant off-balance-sheet and credit
risk concentrations. Financial instruments that subject the Company to credit
risk consist primarily of trade accounts receivable. Accounts receivable
subject the Company to the potential for credit risk with customers in the
health care industry. The Company performs ongoing credit evaluations of its
customers' financial condition but does not require collateral.
Historically, the Company has not experienced significant losses related to
its accounts receivable. The Company utilizes primarily one distributor for
the sales of its filter products. This distributor had amounts due to the
Company of approximately $748,000 and $992,000 as of December 31, 1999 and
1998, respectively. This distributor accounted for 26%, 33%, and 65% of
product revenues for fiscal 1999, 1998 and 1997, respectively. The Company
also had one customer whose revenues accounted for 12% and 10% of product
revenues for fiscal 1999 and 1998. This customer's accounts receivable
balance represented 5% and 8%, respectively of total accounts receivable for
the years ended December 31, 1999 and 1998. The Company has a number of
accounts receivable denominated in foreign currencies that are translated at
year-end exchange rates. For the years ended December 31, 1999 and 1998,
foreign sales accounted for 48% and 45% of total revenues, respectively.
(g) Impairment of Long-Lived Assets
The Company follows the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
SFAS No. 121 addresses accounting and reporting requirements for impairment
of long-lived assets based on their fair market values.
A-11
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(g) Impairment of Long-Lived Assets--(continued)
The carrying value of intangible assets, principally goodwill, is
periodically reviewed by the Company based on the expected future
undiscounted operating cash flows of the related business unit. At December
31, 1999, the Company recorded a $6,801,000 impairment charge for goodwill
recorded upon the acquisition of NMT Neurosciences in July 1998. This
impairment charge was determined based upon the Company's analysis of
estimated future cash flows of NMT Neurosciences and the carrying value of
all of the long-lived assets of NMT Neurosciences which were sold in April
2000. The Company's assessment of the value of the assets of NMT
Neurosciences was corroborated by independent outside parties.
(h) Depreciation and Amortization
The Company provides for depreciation and amortization by charges to
operations using the straight-line method, which allocates the cost of
property, plant and equipment over the following estimated useful lives:
<TABLE>
<CAPTION>
Estimated
Asset Classification Useful Life
-------------------- -----------
<S> <C>
Buildings 30 Years
Leasehold improvements Life of Lease
Laboratory and computer equipment 3-7 Years
Equipment under capital lease Life of Lease
Office furniture and equipment 5-10 Years
</TABLE>
(i) Revenue Recognition
The Company records product sales upon shipment to the customer. Products
sold to the Company's distributors are not subject to a right of return for
unsold product. License fees, royalties and product development revenue are
recognized as earned.
A-12
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(j) Net Loss per Common and Potential Common Share
The Company applies SFAS No. 128, Earnings per Share. SFAS No. 128
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common
stock. In accordance with Staff Accounting Bulletin (SAB) No. 98, the
Company has determined that there were no nominal issuances of common stock
or potential common stock in the periods prior to the Company's initial
public offering. Diluted loss per share is the same as basic loss per share
as the effects of the Company's potential common stock (2,066,956, 1,933,273
and 1,746,861 shares for the years ended December 31, 1999, 1998 and 1997,
respectively) are antidilutive.
(k) Foreign Currency
The accounts of the Company's subsidiaries are translated in accordance with
SFAS No. 52, Foreign Currency Translation. Accordingly, the accounts of the
Company's foreign subsidiaries are translated from their local currency,
which is the functional currency, into U.S. dollars, the reporting currency,
using the exchange rate at the balance sheet date. Income and expense
accounts are translated using an average rate of exchange during the period.
Cumulative foreign currency translation gains or losses are reflected as a
separate component of consolidated stockholders' equity and amounted to a
cumulative loss of approximately $708,000 for the year ended December 31,
1999 and a cumulative gain of $687,000 for the year ended December 31, 1998.
There was no foreign currency translation gains or losses for the year ended
December 31, 1997. Additionally, the Company had a foreign currency exchange
transaction gain of approximately $105,000 for the year ended December 31,
1999 and foreign currency losses of approximately $88,000 and $15,000 for the
years ended December 31, 1998 and 1997, respectively. Foreign currency
transaction gains and losses result from differences in exchange rates
between the functional currency and the currency in which a transaction is
denominated and are included in the consolidated statement of operations in
the period in which the exchange rate changes.
A-13
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(l) Comprehensive Income
The Company applies the provisions of SFAS No. 130, Reporting Comprehensive
Income, which establishes standards for reporting and displaying
comprehensive income and its components in the consolidated financial
statements. Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. If presented on the statement of
operations, comprehensive net loss would have increased the reported net loss
by $1,395,000 for the year ended December 31, 1999 and decreased the net loss
by $687,000 for the year ended December 31, 1998.
(m) Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 as amended by SFAS No. 137, Deferral of the effective date of the FASB
Statement No. 133 is effective for fiscal quarters beginning after June 15,
2000. SFAS No. 133 establishes accounting and reporting disclosure standards
for derivative instruments, including certain derivative instruments embedded
in other contracts (collectively referred to as derivatives), and for hedging
activities. The Company does not expect adoption of this statement to have a
material impact on its consolidated financial position or results of
operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition." This bulletin established
guidelines for revenue recognition. The Company does not expect the adoption
of this methodology to have a material impact on the financial condition or
results of operations.
(n) Pension Obligations
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits. The statement is effective for
fiscal years beginning December 15, 1997. During the year ended December 31,
1998, the Company adopted the provisions of SFAS No. 132, which establishes
accounting and reporting disclosure standards for pension and other
postretirement benefit plans. As part of the acquisition of Elekta
Neurosurgical Instruments (ENI) (See Note 3(b)), the Company assumed a
defined benefit plan covering substantially all of its U.K. employees. This
defined benefit plan was included in liabilities assumed by the purchaser of
the Company's U.K. operations in April 2000 (see Note 3(a)).
A-14
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(n) Pension Obligation--(continued)
In October 1996, the Company adopted a qualified defined contribution plan,
the Nitinol Medical Technologies, Inc. 401(k) Plan (the 401(k) Plan) pursuant
to which U.S. employees may defer up to 15% of their salary, subject to
certain limitations. The Company did not make any employee matching or other
discretionary contributions to the 401(k) Plan for the years ended December
31, 1999, 1998 and 1997.
(o) Prior-Year Account Balances
Certain prior-year account balances have been reclassified to be consistent
with the current year's presentation.
A-15
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(p) Noncash Investing and Financing Activities
The following table summarizes the supplemental disclosures of the Company's
noncash financing and investing transactions for the periods indicated below:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for--
Interest $ 1,983,001 $ 1,371,912 $ 46,152
============= ============ ========
Income Taxes $ 121,148 $ 728,324 $ 32,000
============= ============ ========
Supplemental disclosure of noncash financing and investing transactions:
Equipment acquired under capital lease obligations $ 1,100,000 $ 195,827 $400,091
============= ============ ========
Noncash tax benefit relating to exercise of stock options $ -- $ 90,000 $366,000
============= ============ ========
Abandonment of leasehold improvements $ -- $ -- $111,472
============= ============ ========
Original issue discount recorded related to stock warrant issued in
connection with subordinated notes payable $ -- $ 3,255,001 $ --
============= ============ ========
Acquisition of Elekta Neurosurgical Instruments (ENI):
Fair value of identifiable assets acquired $ -- $ 26,475,000 $ --
Goodwill and other intangibles $ -- 14,396,075 --
In-process research and development $ -- 4,710,000 --
Liabilities assumed $ -- (10,007,000) --
Issuance of Common Stock in connection with acquisition $ -- (659,999) --
Cash acquired -- (2,193,000) --
------------- ------------ --------
Cash paid for purchase of ENI, net of cash acquired $ -- $ 32,721,076 $ --
============= ============ ========
</TABLE>
(3) NMT NEUROSCIENCES DIVISION
(a) Sale of U.K. Operations of NMT Neurosciences Division
On April 5, 2000, the Company sold the U.K. operations of its NMT
Neurosciences division including the Selector Ultrasonic Aspirator, Ruggles
Surgical Instruments and cryosurgery product lines and certain assets and
liabilities for $12.0 million in cash. The Company recorded a $3.5 million
loss on this sale, comprised of net proceeds of $12.0 million less estimated
transaction and other costs of $3.7 million, and net assets sold of $11.8
million. The transaction costs consisted principally of legal and accounting
fees, severance arrangements with certain employees and other estimated
costs associated with discontinuing the operation and consummating the sale.
A-16
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) NMT NEUROSCIENCES DIVISION--(CONTINUED)
(a) Sale of U.K. Operations of NMT Neurosciences Division--(continued)
The net assets sold as of December 31, 1999 consist of the following:
<TABLE>
<S> <C>
Current assets $ 6,525,000
Property and equipment, net 1,273,000
Goodwill and other intangible assets, net 6,195,000
-----------
Total assets 13,993,000
Current liabilities (2,197,000)
-----------
$11,796,000
===========
</TABLE>
The consolidated financial statements of the Company have been restated to
reflect the financial results of the U.K. entity as a discontinued operation
for the years ended December 31, 1999 and 1998. The Company did not allocate
interest expense associated with the senior secured debt and subordinated
notes discussed in Notes 9(a) and 9(b) to discontinued operations. The
discontinued operation is estimated to have break-even operating results for
the first quarter of 2000.
The Company used approximately $7.3 million of the proceeds from this sale to
fully pay down its senior secured debt agreement and $500,000 to pay down its
subordinated note agreement as discussed in Notes 9(a) and 9(b).
(b) Acquisition of Elekta Neurosurgical Instruments
On July 8, 1998, the Company acquired ENI, the neurosurgical instruments
business of Elekta AB (PUBL), a Swedish corporation, for approximately
$33 million, plus acquisition costs of approximately $3.1 million. The
acquisition has been accounted for as a purchase in accordance with the
requirements of Accounting Principles Board (APB) Opinion No. 16, Business
Combinations, and accordingly ENI's results of operations are included in
those of the Company beginning on the date of the acquisition. The
transaction was financed with $13 million of the Company's cash, $3.1 million
of acquisition costs and $20 million of subordinated debt borrowed from an
affiliate of a significant stockholder of the Company (see Note 9(a)). A
significant portion of the purchase price was identified as intangible assets
in an independent appraisal, using proven valuation procedures and
techniques.
A-17
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) NMT NEUROSCIENCES DIVISION--(CONTINUED)
(b) Acquisition of Elekta Neurosurgical Instruments--(continued)
These intangible assets included $4.7 million for acquired in-process
research and development for projects that did not have future alternative
uses. This allocation represents the estimated fair market value based on
risk-adjusted cash flows related to the in-process research and development
programs. The in-process research and development consists of five primary
research and development programs that were expected to reach completion
between late 1998 and 2000. At the acquisition date, continuing research and
development commitments to complete the projects were expected to be
approximately $2.0 million through 2000.
These estimates are subject to change given the uncertainties of the
development process. At the date of acquisition, the development of these
programs had not yet reached technological feasibility and the in-process
research and development had no alternative future uses. Accordingly, these
costs were written off during the year ended December 31, 1998. For income
tax purposes, a significant portion of the acquisition represented the
purchase of stock with a carryover tax basis. Accordingly, a deferred tax
liability has been established to account for the book and tax differences in
book value for building and leasehold improvements.
The remaining premium of approximately $17.2 million was allocated to the
following identifiable assets, goodwill and other intangibles and will be
amortized over periods of 7 to 30 years:
<TABLE>
<CAPTION>
AMORTIZATION
AMOUNT PERIOD
------ ------
<S> <C> <C>
Land and buildings $ 4,650,000 30 years
Favorable lease 1,170,000 30 years
Goodwill and other intangibles 13,226,000 7-20 years
Deferred tax liability (1,896,000)
-----------
$17,150,000
===========
</TABLE>
A-18
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) NMT NEUROSCIENCES DIVISION--(CONTINUED)
(b) Acquisition of Elekta Neurosurgical Instruments--(continued)
The total consideration allocated to the fair market value of assets and
liabilities acquired on the purchase date is as follows, net of cash acquired
of approximately $2.2 million:
<TABLE>
<S> <C>
Accounts receivable $ 5,578,000
Inventories 6,688,000
Prepaid expenses and other current assets 2,024,000
Property and equipment 9,992,000
Goodwill and other intangible assets 14,396,075
In-process research and development 4,710,000
Accounts payable and accrued expenses (7,324,000)
Senior debt (523,000)
Deferred tax liability (2,160,000)
-----------
$33,381,075
===========
</TABLE>
The Company issued 113,793 shares of the Company's $.001 par value common
stock, valued at $5.80 per share, to a significant stockholder as a finders'
fee in connection with the acquisition. In addition, the Company incurred
direct acquisition costs of approximately $1.9 million. These amounts have
been included in the purchase price.
The following table presents selected unaudited financial information of the
Company and the neurosurgical division of Elekta AB, assuming the companies
combined on January 1, 1998. The unaudited pro forma results are not
necessarily indicative of either the actual results that would have occurred
had the acquisition been consummated on January 1, 1998 or of future results:
<TABLE>
<CAPTION>
For the
Year Ended
December 31,
1998
----
(Unaudited)
<S> <C>
Pro forma net revenues $35,315,000
===========
Pro forma net loss $(8,380,000)
===========
Basic and diluted weighted average
common shares outstanding 10,543,663
===========
Basic and diluted net loss per
common share $ (.79)
===========
</TABLE>
A-19
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) INVESTMENT IN IMAGE TECHNOLOGIES CORPORATION
In May 1997, the Company invested $2.3 million in Image Technologies
Corporation (ITC) in exchange for 345,722 shares of ITC's redeemable
convertible Series A preferred stock, $.01 par value per share, which
represented a 23% ownership interest in ITC. During the years ended
December 31, 1999 and 1998, the Company recorded $489,000 and $437,000,
respectively, as its equity in the net loss of ITC. Under the terms of this
agreement, the Company also extended to ITC a $2 million credit line that
bears interest at 10% per annum, payable monthly beginning March 31, 2001.
This $2 million senior note is secured by substantially all of the assets of
ITC. The principal amount of the note is convertible, at the option of the
Company, into additional shares of ITC Series A preferred stock at a price
per share of $2.54 at any time before January 1, 2001 and, if converted, any
interest accrued as of such date shall be forgiven. If not converted, the
note is payable on December 31, 2002. On December 30, 1998 and February 3,
1999, the Company amended its revolving credit note agreement with ITC to
provide for additional borrowings of $50,000 and $100,000, respectively,
under which ITC borrowed $38,043 and $100,000. The borrowings under the
$50,000 note were repaid in April 1999. The $100,000 note accrues interest at
10% per annum and is generally subject to the same terms as the $2 million
credit line agreement, except that it is convertible into additional shares
of ITC Series A preferred stock at a price per share of $9.97. In connection
with the issuance of the $100,000 note, ITC granted a warrant to the Company
to purchase 10,030 shares of ITC Series A preferred stock at $9.97 per share.
As of December 31, 1999, ITC borrowed $2.1 million under these agreements and
owes the Company accrued interest of $281,000. During the year ended
December 31, 1999, the Company performed a detailed review of the ITC
operations. Based upon this analysis and discussion with ITC's management and
investors, the Company determined that there was a significant risk that its
notes receivable would be repaid by ITC. The analyses and discussions
indicated that during the year ended December 31, 1999, ITC had insufficient
cash resources to fund its operations, that product revenue had declined
during 1999 and was far below planned levels and that ITC was seeking
additional capital from numerous sources and that any future financing would
possibly be dilutive to the Company's equity position and may contain a
security interest senior to the Company's notes receivable. Accordingly, the
Company charged the carrying value of the notes receivable to operations
during the year ended December 31, 1999.
A-20
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) RESTRUCTURING CHARGE
During 1997, the Company reorganized its vena cava filter operations and
brought the assembly of its straight-line vena cava filters in-house. In
connection with this restructuring, the Company reduced staff and incurred
other nonrecurring costs. The $194,000 restructuring charge in the
accompanying statements of operations includes a noncash charge of $112,000
for the accelerated vesting of certain stock options, cash severance and
benefits of $62,000, and $20,000 for the transfer of assembly technology.
Other start-up costs related to the in-house assembly of the straight-line
vena cava filter, including the training of manufacturing personnel and
associated materials and overhead, are included in cost of goods sold in the
accompanying statements of operations.
(6) MERGER AND INTEGRATION CHARGE
In connection with the acquisition of ENI on July 8, 1998, the Company
reorganized its operations and recorded approximately $687,000 in merger and
integration expenses during the year ended December 31, 1998. This amount
consists principally of employee severance and replacement costs of $374,000,
employee relocation costs of $152,000 and printing and corporate name change
costs of $161,000. As of December 31, 1998, the accompanying consolidated
balance sheet included approximately $235,000 of merger and integration
expenses that were incurred but not yet paid. There are no such accrued
expenses on the balance sheet as of December 31, 1999.
(7) INCOME TAXES
The Company provides for income taxes in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes. Accordingly, a deferred tax asset
or liability is determined based on the difference between the financial
statement and tax basis of assets and liabilities, as measured by the enacted
tax rates expected to be in effect when these differences reverse.
The provision for income taxes in the accompanying consolidated statement of
operations for the years ended December 31, 1999 and 1998 consists of the
following:
<TABLE>
<CAPTION>
At December 31,
--------------------
1999 1998
---- ----
<S> <C> <C>
Foreign - current $ 180,000 $ 701,192
Federal - current (300,000) 411,038
State - current -- 13,000
--------- ----------
(120,000) 1,125,230
--------- ----------
Foreign - deferred (75,000) (169,192)
Federal - deferred 375,000 (167,500)
State - deferred -- (44,000)
--------- ----------
300,000 (380,692)
--------- ----------
$ 180,000 $ 744,538
========= ==========
</TABLE>
A-21
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has federal and state net operating loss carryforwards of
approximately $15 million to reduce to reduce federal and state taxable
income in future periods, if any and approximately $50,000 and $140,000 of
federal and state tax credit carryforwards, respectively, to reduce federal
and state income taxes in future periods, if any. These carryforwards are
subject to review and possible adjustment by the Internal Revenue Service and
their utilization may be limited by aggregate changes in significant
ownership of the Company over a three year period as prescribed by Section
382 of the Internal Revenue Code. These carryforwards expire on various dates
through 2019.
As of December 31, 1999, the Company has available foreign net operating loss
carryforwards of approximately $1.2 million. These operating losses were
acquired in connection with the purchase of ENI, as discussed in Note 3. The
Company did not allocate any of the purchase price to the net operating
losses due to the uncertainty surrounding the ability to utilize the losses
and the possibility that the losses are subject to review and possible
adjustments by foreign tax authorities. The Company was able to utilize
approximately $450,000 and $1.8 million of acquired operating losses during
the years ended December 31, 1999 and 1998, respectively and credited the
benefit of such losses of $180,000 and $674,000 to goodwill. The Company
recorded the tax effect of utilizing these loss carryforwards as a reduction
in the carrying value of the goodwill.
The provision for income taxes in the year ended December 31, 1999 represents
the taxes on income generated in France by NMT Neurosciences. The Company
generated a net operating loss for federal and state income tax purposes in
the United States in the year ended December 31, 1999.
The provision for income taxes in 1998 and 1997 is calculated on the income
before provision for taxes without taking into account the write-off of
acquired in-process research and development, the equity in the loss of ITC
and goodwill amortization. The acquired in-process write-off was
$4,710,000 and $2,449,071 for 1998 and 1997, respectively, the equity in the
net loss of ITC was $437,145 for 1998, and the goodwill amortization was
$140,000 and $0 for 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to the significant
portions of the current deferred tax asset (included in prepaid expenses and
other current assets) and long-term deferred tax liability at December 31,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
At December 31,
---------------------
1999 1998
---- ----
<S> <C> <C>
Net operating loss carryforwards $ 1,646,000 $ --
Tax credit carryforwards 190,000 --
Timing differences, including reserves
accruals, and write-offs 5,867,000 725,000
----------- -----------
7,703,000 725,000
Less - valuation allowance (7,703,000) (350,000)
----------- -----------
Net deferred tax asset -- 375,000
Deferred tax liability related to
acquisition of ENI (1,283,008) (1,357,808)
----------- -----------
Net deferred tax asset (liability) $(1,283,008) $ (982,808)
=========== ===========
</TABLE>
A-22
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has provided a valuation allowance for its gross deferred tax
asset due to the uncertainty surrounding the ability to realize this asset.
The deferred tax liability relates primarily to the tax impact of the
difference in the tax basis and book basis of the building and leasehold
improvements resulting from the ENI purchase accounting. This difference in
basis will not be deductible in future years. See Note 3.
(8) DEFERRED REVENUE
On November 22, 1994, the Company licensed exclusive, worldwide rights,
including the right to sublicense to others, to develop, produce and market
its stent technology to an unrelated third party (the License Agreement).
Under the License Agreement the Company earned $1,829,000, $1,729,000 and
$1,200,000 in license revenues during the years ended December 31, 1999, 1998
and 1997, respectively.
(9) DEBT OBLIGATIONS
The Company has the following debt outstanding as of December 31, 1999 and
1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Subordinated note payable $ 5,232,412 $16,960,489
Senior secured notes payable 7,279,134 --
Capital lease obligations 1,633,686 786,502
Line of credit facility 428,000 --
----------- -----------
14,573,232 17,746,991
Less-Current portion 1,002,877 202,248
----------- -----------
$13,570,355 $17,544,743
=========== ===========
</TABLE>
(a) Subordinated Note Payable
The Company financed a significant portion of the acquisition of ENI (see
Note 3(b)) with $20 million of subordinated debt borrowed from an affiliate
of a significant stockholder of the Company. The subordinated debt is due
September 30, 2003 with quarterly interest payable at 10.101% per annum and
is subject to certain covenants, as amended.
On September 13, 1999, the Company entered into a $10 million senior secured
debt facility with a bank (See Note 9(b)), $8 million of the proceeds of
which was used to reduce the principal amount of the subordinated note. The
Company also used $6 million of its own cash to further reduce the principal
amount of this note. In conjunction with this transaction, the Company
recorded a $2.6 million extraordinary loss on the early extinguishment of
debt in the accompanying statement of operations which primarily relates to
the accelerated pro-rata write-off of the original issue discount and
deferred financing costs of the subordinated note payable. The remaining
original issue discount at December 31, 1999, is being amortized to interest
expense over the remaining term of the subordinated debt of 45 months. The
Company recorded approximately $531,000 of interest expense relating to the
amortization of original issue discount for the year ended December 31, 1999.
As of December 31, 1999, the Company was not in compliance with certain of
the debt covenants of the subordinated note payable and has obtained a waiver
of default from the holder of the note. Subsequent to year-end, the Company
paid down $500,000 of this note from the proceeds obtained in connection with
the sale of part of its Neurosciences division (see Note 3(a)).
A-23
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) DEBT OBLIGATIONS--(CONTINUED)
(b) Senior Secured Debt
On September 13, 1999, the Company entered into a $10 million senior secured
debt facility with a bank, $8 million of the proceeds of which was used to
reduce the principal amount of the Company's subordinated note payable (See
Note 9(a)). The remaining $2 million of the senior secured debt facility is
available to be drawn down by the Company for working capital purposes, as
needed. The facility has a term of three years with interest payable monthly
at the bank's prime lending rate (8.5% at December 31, 1999) on U.S.
borrowings and an equivalent market rate on foreign currency borrowings. As
of December 31, 1999, the Company had outstanding borrowings of $7.3 million
under this facility. As of December 31, 1999, the Company was not in
compliance with certain of the debt covenants of the secured debt facility
and has obtained a waiver of default from the bank. Subsequent to year-end,
the Company paid down this note in its entirety from the proceeds obtained in
connection with the sale of part of its Neurosciences division (see Note
3(a)).
(c) Capital Lease Obligations
In June 1996, the Company entered into a $1.5 million lease finance facility
agreement with a bank under which the Company leases equipment at an interest
rate that is 200 basis points above the bank's cost of funds. Leases under
this agreement are payable in equal monthly installments over a period of 36-
60 months and expire through November 2001. Borrowings of $572,000 were made
under this agreement, of which $202,000 was outstanding as of December 31,
1999.
Upon expiration of this agreement in June 1997, the Company entered into a
new agreement with the bank that provided the Company with similar terms and
the option to borrow up to $1 million in the aggregate for the Company and
ITC through March 31, 1998. Leases under this agreement are payable in equal
monthly installments over a period of 36-60 months and expire through
December 2002. Borrowings of $376,000 and $250,000 were made under this
agreement by the Company and ITC, respectively, of which $196,000 and
$113,000 were outstanding as of December 31, 1999.
A-24
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) DEBT OBLIGATIONS--(CONTINUED)
(c) Capital Lease Obligations--(continued)
On April 1, 1998, the Company entered into a new agreement with this bank
that provided the Company and ITC with similar terms and the option to borrow
up to $750,000 through March 31, 1999. Borrowings of $169,000 and $163,000
have been made under this new agreement by the Company and ITC, respectively,
of which $128,000 and $124,000 were outstanding as of December 31, 1999,
respectively. Leases under these agreements are payable in equal monthly
installments over a period of 60 months and expire through May 2004. The
Company guarantees the outstanding leases of ITC under these agreements.
In June 1999, the Company entered into a lease agreement with a bank for
approximately $150,000 to be used for equipment purchases. Borrowings under
this agreement accrue interest at 6.67%, are payable in monthly installments,
are collateralized by the equipment purchased, and expire in June 2002.
Approximately $105,000 is outstanding under this agreement as of December 31,
1999.
In December 1999, the Company entered into a lease agreement with a bank for
approximately $1 million to be used for equipment purchases. Borrowings
under this agreement accrue interest at 5.64%, are payable in monthly
installments, are collateralized by the equipment purchased, and expire in
December 2002. Approximately $1 million of borrowings are outstanding as of
December 31, 1999.
A-25
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) DEBT OBLIGATIONS--(CONTINUED)
(c) Capital Lease Obligations--(continued)
Future minimum lease payments under the capital lease obligations of the
Company as of December 31, 1999 are approximately as follows:
<TABLE>
<CAPTION>
Year Ending Amount
----------- ------
<S> <C>
2000 $ 728,961
2001 575,507
2002 446,920
2003 35,674
2004 1,854
-----------
Total minimum lease payments 1,788,916
Less--Amount representing interest 155,230
-----------
1,633,686
Less--Current portion 574,877
-----------
$ 1,058,809
===========
</TABLE>
(d) Line-of-Credit Facility
In June 1999 the Company entered into a finance facility agreement with a
bank for approximately $475,000. Borrowings under this facility accrue
interest at a rate of 5.38% per annum and are collateralized by the Company's
accounts receivables. Borrowings of $428,000 under this line were
outstanding as of December 31, 1999.
A-26
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) DEBT OBLIGATIONS--(CONTINUED)
(e) Future Maturities of Debt Obligations
Future payments of the Company's subordinated note, senior secured debt, and
capital lease obligations are as follows:
<TABLE>
<CAPTION>
Year Ending Amount
----------- ------
<S> <C>
2000 $ 1,156,961
2001 575,507
2002 7,726,054
2003 6,035,674
2004 1,854
-----------
15,496,050
Less--Unamortized original issue discount (767,588)
Less--Amount representing interest (155,230)
-----------
$14,573,232
===========
</TABLE>
(10) COMMITMENTS
(a) Manufacturing Agreement
The Company contracts with an unrelated third party for the manufacture of
certain components. Under the amended agreement dated February 15, 1996, the
Company is required to purchase minimum unit quantities through June 2001.
The aggregate minimum purchases under the agreement are approximately $2.6
million. In addition, in the event of an order cancellation or product
conversion, the Company has agreed to purchase all in-process materials and
all special materials purchased by the manufacturer for use in the production
of these components, limited to purchase orders through 180 days after
cancellation.
(b) Operating Leases
The Company has entered into operating leases for office and laboratory space
and for motor vehicle leases. These leases expire through 2006. The leases
require payment of all related operating expenses of the building, including
real estate taxes and utilities in excess of base-year amounts.
A-27
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) COMMITMENTS--(CONTINUED)
Future minimum rental payments due under operating lease agreements as of
December 31, 1999 are approximately as follows:
<TABLE>
<CAPTION>
Year Ending Amount
----------- ------
<S> <C>
2000 $ 608,000
2001 635,000
2002 677,000
2003 637,000
2004 551,000
Thereafter 872,000
----------
$3,980,000
==========
</TABLE>
Rent expense for the years ended December 31, 1999, 1998 and 1997 amounted to
approximately $602,000, $524,000 and $482,000, respectively. In addition,
the Company is a guarantor of the lease of office space for ITC (see
Note 9(c)).
(c) Royalties
The Company has entered into various agreements that require payment of
royalties based on specified percentages of future sales, as defined. In
addition, the Company has agreed to pay royalties to certain employees based
on sales or licenses of products where they were the sole or joint inventor.
Future minimum commitments under these agreements are approximately $15,000
per year. Royalty expense under royalty agreements was $838,000, $640,000
and $278,000 for the years December 31, 1999, 1998 and 1997, respectively.
In addition to the royalties discussed above, during the year ended December
31, 1998, the Company entered into an agreement to pay royalties of $87,500
per quarter to two individuals for a product for which these individuals own
the rights. Payment of these royalties began in the fourth quarter of 1998
and are to be paid each quarter through the quarter ending September 30,
2001. The Company paid $350,000 for such royalties during the year ended
December 31, 1999 of which approximately $50,000 has been expensed during
1999 and the remaining royalties will be expensed over the life of the
royalty arrangement.
Additionally, these individuals are also to receive $50,000 per quarter for
their product development and marketing consulting efforts. These payments
began in the third quarter of 1998 and will continue each quarter through the
quarter ended June 30, 2000. The Company recorded $200,000 and $100,000 for
such services during the years ended December 31, 1999 and 1998,
respectively.
(d) Legal Proceedings
In papers dated November 24, 1999 Elekta AB (publ) filed a request for
arbitration in the London Court of International Arbitration ("LCIA")
alleging that the Company breached its payment obligation under the Sale and
Purchase Agreement between the parties dated May 8, 1998 pursuant to which
the Company purchased certain assets from Elekta as discussed in Note 3(b).
Elekta seeks approximately $1.6 million in damages. On January 14, 2000, the
Company filed its response with the LCIA in which the Company denied Elekta's
claims and indicated that it would assert a counterclaim for approximately
$2.5 million for Elekta's breach of the
A-28
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
same contract. On February 17, 2000 an arbitrator was appointed, and a
Statement of the Case was sent to the LCIA by Elekta on March 23, 2000. The
parties are currently in the pleadings stage.
(11) STOCK OPTIONS AND WARRANTS
(a) Nonqualified Stock Options
The Company granted nonqualified options to various officers, directors,
employees, and/or consultants to purchase shares of common stock. The options
become exercisable in full or in part at issuance or within one to four years
of the date of issuance. All unexercised grants expire on the earlier of
approximately seven to ten years from date of issuance or 90 days after
termination of service as an officer, director, employee and/or consultant.
As of December 31, 1999, 1,097,068 shares are subject to outstanding options
at exercise prices of $.76-$14.00 per share.
(b) Stock Option Plans
1994 Stock Option Plan. In May 1994, the Board of Directors approved a
stock option plan (the 1994 Plan), which authorizes the Company to issue
options to purchase up to 315,789 shares of the Company's common stock. The
Company may grant options to officers, key employees, directors and
consultants of the Company at an exercise price not less than fair market
value as determined by the Board of Directors. Through December 31, 1999 the
Company has granted 308,368 options under this plan and does not intend to
grant any additional options under this plan. As of December 31, 1999,
58,880 shares are subject to outstanding options at exercise prices of $2.15-
$8.93 per share.
1996 Stock Option Plan. The Nitinol Medical Technologies, Inc. 1996 Stock
Option Plan (the 1996 Plan) was approved by the Company's stockholders in
July 1996. The 1996 Plan provides for the grant of options to acquire a
maximum of 600,000 shares of common stock. As of December 31, 1999, 586,284
shares are subject to outstanding options at exercise prices of $2.00-$14.63
per share. The Board of Directors has appointed a Stock Option Committee of
the Board as the Plan Administrator. The 1996 Plan permits the granting of
incentive stock options or nonstatutory stock options at the discretion of
the Plan Administrator. Subject to the terms of the 1996 Plan, the Plan
Administrator determines the terms and conditions of options granted under
the 1996 Plan. At December 31, 1999, 13,716 shares are available for future
grants under the 1996 Plan.
A-29
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) STOCK OPTIONS AND WARRANTS--(CONTINUED)
(b) Stock Option Plans--(continued)
The 1996 Director's Stock Plan. The Nitinol Medical Technologies, Inc. 1996
stock option plan for nonemployee directors (the 1996 Directors' Stock Plan)
was approved by the Company's stockholders in July 1996. The 1996 Directors'
Stock Plan provides for the automatic grant of nonstatutory stock options to
purchase shares of common stock to directors of the Company who are not
employees of the Company and who do not otherwise receive compensation from
the Company. Under the 1996 Directors' Stock Plan, 150,000 shares of common
stock have been reserved for issuance of options. Each eligible director
serving on the Board on the effective date of the 1996 Directors' Stock Plan
automatically received an option to purchase 10,000 shares of common stock at
a price equal to the initial public offering price, subject to vesting in
equal monthly installments over a period of three years.
In the future, each nonemployee director not otherwise compensated by the
Company who joins the Board will automatically receive an initial grant of
options to purchase 10,000 shares of common stock at an exercise price equal
to the fair market value per share at the date of grant, subject to vesting
in equal monthly installments over a three-year period.
In each year other than the year in which a director receives an initial
grant of options, such director will automatically receive options to
purchase 2,500 shares of common stock that shall become fully vested six
months after the date of grant. As of December 31, 1999, 87,500 shares are
subject to outstanding options at an exercise price of $3.38-$13.13 per
share, of which 83,056 shares are exercisable.
1998 Stock Incentive Plan. The Nitinol Medical Technologies, Inc. 1998
Stock Incentive Plan (the 1998 Plan) was approved by the Company's
stockholders during 1998. The 1998 Plan provides for the grant of options to
acquire a maximum of 800,000 shares of common stock. As of December 31,
1999, 237,225 shares are subject to outstanding options at exercise prices of
$2.75-$6.50 per share. The 1998 Plan permits the granting of incentive stock
options or nonstatutory stock options at the discretion of the Board of
Directors. Subject to the terms of the 1998 Plan, the Board of Directors
determines the terms and conditions of options granted under the 1998 Plan.
As of December 31, 1999, 562,775 shares are available for future grants under
the 1998 Plan.
A-30
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) STOCK OPTIONS AND WARRANTS--(CONTINUED)
(b) Stock Option Plans--(continued)
The following table summarizes all stock option activity under all of the
Company's stock option plans, including grants outside of the 1998, 1996 and
1994 Plans:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
NUMBER OF PRICE PER
SHARES SHARE
------ -----
<S> <C> <C>
Balance, January 1, 1997 1,972,257 $ 3.56
Granted 141,500 12.04
Canceled (44,411) 9.72
Exercised (322,485) 1.68
--------- ------
Balance, December 31, 1997 1,746,861 4.44
Granted 459,600 7.20
Canceled (103,229) 9.19
Exercised (169,959) 1.79
--------- ------
Balance, December 31, 1998 1,933,273 5.05
--------- ------
Granted 281,675 3.70
Canceled (67,292) 8.67
Exercised (80,700) 1.33
--------- ------
Balance, December 31, 1999 2,066,956 $ 4.90
--------- ------
Exercisable, December 31, 1999 1,470,903 $ 4.32
========= ======
Exercisable, December 31, 1998 1,286,891 $ 3.67
========= ======
Exercisable, December 31, 1997 1,037,188 $ 2.99
========= ======
</TABLE>
The following detail pertains to outstanding options of the Company at
December 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE EXERCISE PRICE REMAINING NUMBER OF EXERCISE PRICE
SHARES RANGE PER PER SHARE CONTRACTUAL LIFE OF SHARES PER SHARE
OUTSTANDING SHARE OUTSTANDING OUTSTANDING OPTIONS OUTSTANDING EXERCISABLE EXERCISABLE
- ----------------- ------------------ ---------------- ------------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
1,106,181 $ .76-4.25 $ 2.29 6.42 Years 923,436 $ 2.13
903,525 4.38-10.88 7.59 7.68 Years 514,717 7.83
57,250 11.50-14.63 12.70 7.35 Years 32,750 12.74
--------- ------------ ------ ---------- --------- ------
2,066,956 $ .76-$14.63 $ 4.90 7.00 Years 1,470,903 $ 4.32
========= ============ ====== ========== ========= ======
</TABLE>
The Company accounts for its stock-based compensation plans under APB Opinion
No. 25, Accounting for Stock Issued to Employees. SFAS No. 123 establishes a
fair-value based method of accounting for stock-based compensation plans.
A-31
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) STOCK OPTIONS AND WARRANTS--(CONTINUED)
(b) Stock Option Plans--(continued)
The Company has adopted the disclosure-only alternative under SFAS No. 123
for grants to employees, which requires disclosure of the pro forma effects
on earnings and earnings per share as if SFAS No. 123 had been adopted, as
well as certain other information. The Company has computed the pro forma
disclosures required under SFAS No. 123 for all employee stock options
granted in 1998, 1997 and 1996 using the Black-Scholes option pricing model
prescribed by SFAS No. 123.
The assumptions used and the weighted average information for the years ended
December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rates 4.80%-6.38% 4.65%-5.72% 5.71%-6.61%
Expected dividend yield -- -- --
Expected lives 7 years 7 years 3-5 years
Expected volatility 87% 66% 67%
Weighted average grant-date
fair value of options
granted during the period $ 2.90 $ 4.66 $ 6.38
</TABLE>
The effect of applying SFAS No. 123 would be as follows for the years ended
December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net loss:
As reported $(19,052,693) $(3,679,440) $(2,670,975)
============ =========== ===========
Pro forma $(20,101,646) $(4,564,706) $(2,670,975)
============ =========== ===========
Basic and diluted net loss
per common share:
As reported $ (1.77) $ (.36) $ (.28)
============ =========== ===========
Pro forma $ (2.10) $ (.47) $ (.28)
============ =========== ===========
</TABLE>
A-32
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) STOCK OPTIONS AND WARRANTS--(CONTINUED)
(c) Warrants
The following table summarizes the Company's warrant activity :
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
NUMBER OF PRICE PER
SHARES SHARE
------ -----
<S> <C> <C>
Balance, January 1, 1997 253,031 $3.48
Exercised (64,779) 4.26
------- -----
Balance, December 31, 1997 188,252 3.21
Granted 28,489 2.15
Canceled -- --
Exercised -- --
------- -----
Balance, December 31, 1998 216,741 3.07
Granted 25,000 3.41
------- -----
Balance, December 31, 1999 241,741 $3.10
======= =====
Exercisable, December 31, 1999 241,741 $3.10
======= =====
</TABLE>
On April 15, 1999, the Company negotiated a waiver of the default with the
holder of the subordinated note payable (see note 9(a)). In connection with
such waiver, the Company issued to the noteholder warrants to purchase 25,000
shares of common stock at $3.41 per share.
Subsequent to year-end in connection with the Company's pay-down of debt
discussed in note 9(c), the Company issued the noteholder warrants to
purchase 20,000 shares of the Company's common stock at $4.94 per share.
The Company determined the value of these warrants using the Black-Scholes
option pricing model.
(d) Employee Stock Purchase Plan
Effective October 1, 1997, the Company's shareholders approved an employee
stock purchase plan (the Stock Plan). The Stock Plan allows eligible
employees to purchase common stock of the Company through payroll deductions
at a price that is 85% of the lower of the closing price of the Company's
stock on the either the beginning or ending of the six-month offering period.
The Company has reserved 90,000 of its $.001 par value common stock for
issuance under this Stock Plan. The Company issued 22,461 shares of common
stock under the Stock Plan during the year ended December 31, 1999.
A-33
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(12) TECHNOLOGY PURCHASE AGREEMENT
Pursuant to a technology purchase agreement (TPA), the Company purchased from
a stockholder/founder the proprietary rights to the primary patent for the
SNF and related technology. Under the terms of the TPA, the Company made an
initial payment of $15,000 and agreed to pay royalties based upon various
rates of cumulative net sales, as defined, with minimum royalties payable of
$15,000 per year. Royalties are payable over the life of the primary patent
and commenced after FDA approval. The Company has granted the
stockholder/founder a security interest in substantially all proprietary
rights acquired by the Company. In the event of unsecured defaults, as set
forth in the TPA, the Company has agreed to immediately pay the
stockholder/founder damages of $100,000.
(13) RELATED PARTY TRANSACTIONS
Three stockholders of the Company and related entities provided management
consulting services to the Company during the year ended December 31, 1997
amounting to $196,000. During the years ended December 31, 1999 and 1998,
only one shareholder provided consulting services to the Company, at a rate
of $100,000 per annum. Additionally, during the year ended December 31,
1999, an affiliate of a stockholder provided consulting services to the
Company amounting to approximately $103,000.
In September 1998, a former employee of the Company entered into a secured
promissory note agreement with the Company under which the former employee
borrowed $167,100, which accrues interest at 10 % per annum, and was due the
earlier of September 30, 1999 or the tenth business day on which the closing
price of the Company's stock is greater than $8.00 per share for any
consecutive three-day period. As of December 31, 1999, the amount owed under
this note agreement is approximately $131,000. The note agreement was
extended under similar terms to September 30, 2000 and was paid in full
subsequent to year-end.
On September 1, 1998, a former employee of the Company borrowed $25,000 from
the Company. The loan accrues interest at 10.101% per annum and is
collateralized. The loan was due on January 15, 2000 but was subsequently
extended to March 31, 2000 under similar terms.
A-34
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1999 1998
---- ----
<S> <C> <C>
Payroll and payroll related $1,607,773 $1,518,859
Taxes 635,530 954,860
Other accrued expenses 2,386,063 1,741,781
---------- ----------
$4,629,366 $4,215,500
========== ==========
</TABLE>
A-35
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(15) FINANCIAL INFORMATION BY GEOGRAPHIC AREA
Revenues by country for the years ended December 31, 1999, 1998 and 1997 are
as follows:
<TABLE>
<CAPTION>
Destination 1999 1998 1997
- ----------- ---- ---- ----
<S> <C> <C> <C>
United States $18,251,000 $13,835,000 $ 8,201,848
The Netherlands 4,565,000 2,870,000 93,600
Germany 2,986,000 1,872,000 440,480
Other 9,277,368 6,476,713 1,389,780
----------- ----------- -----------
$35,079,368 $25,053,713 $10,125,708
=========== =========== ===========
</TABLE>
Long-lived assets by country as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Destination 1999 1998
- ----------- ---- ----
<S> <C> <C>
France $ 8,282,000 $ 7,937,000
United States 5,201,635 4,690,750
Other 57,000 49,500
----------- -----------
$13,540,635 $12,677,250
=========== ===========
</TABLE>
(16) SEGMENT REPORTING
The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, during the fourth quarter of 1998. SFAS No. 131
established standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
established standards for related disclosures about products and services and
geographic areas. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision, or decision making
group, in deciding how to allocate resources and in assessing performance.
A-36
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(16) SEGMENT REPORTING--(CONTINUED)
The Company's chief operating decision making group is the Chief Executive
Officer, members of Senior Management, and the Board of Directors. The
operating segments are managed separately because each represents specific
types of medical devices for specific markets (i.e. the core technologies
segment includes minimally-invasive medical devices that were the primary
products of the Company prior to the acquisition of ENI, while the
neurosurgical segment includes primarily neurosurgical medical devices that
were the primary products of ENI).
The Company's operating segments include the core technologies product line
and the neurosurgical product line. Revenues for the core technologies
product line are derived from sales of the Simon Nitinol Filter (SNF) and the
CardioSEAL Septal Occluder, as well as from licensing revenues from the
Company's self-expanding stents. Revenues for the neurosurgical product line
are derived from sales of cerebral spinal fluid shunts, the Spetzler Titanium
Aneurysm Clip and endoscopes and instrumentation for minimally invasive
surgery.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on stand-alone operating segment net income. Revenues are
attributed to geographic areas based on where the customer is located. The
Company operated in only one operating segment, core technologies products,
during the year ended December 31, 1997. Segment information is presented as
follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Segment Revenues:
Core technologies products $ 15,058,368 $13,989,713 $10,125,728
Neurosurgical products 20,021,000 11,064,000 --
------------ ----------- -----------
Total $ 35,079,368 $25,053,713 $10,125,728
============ =========== ===========
Segment Interest Income:
Core technologies products $ 479,617 $ 1,168,056 $ 1,591,922
Neurosurgical products -- -- --
------------ ----------- -----------
Total $ 479,617 $ 1,168,056 $ 1,591,922
============ =========== ===========
Segment Interest Expense:
Core technologies products $ 2,426,211 $ 1,324,346 $ 46,152
Neurosurgical products 388,000 137,000 --
------------ ----------- -----------
Total $ 2,814,211 $ 1,461,346 $ 46,152
============ =========== ===========
Segment Income Tax Provision:
Core technologies products $ -- $ 744,538 $ 229,500
Neurosurgical products 180,000 -- --
------------ ----------- -----------
Total $ 180,000 $ 744,538 $ 229,500
============ =========== ===========
Segment Depreciation and Amortization:
Core technologies products $ 1,071,395 $ 892,088 $ 461,141
Neurosurgical products 966,000 499,000 --
------------ ----------- -----------
Total $ 2,067,395 $ 1,391,088 $ 461,141
============ =========== ===========
Segment Equity in Net Loss of Investees:
Core technologies products $ (488,529) $ (437,145) $ --
Neurosurgical products -- -- --
------------ ----------- -----------
Total $ (488,529) $ (437,145) $ --
============ =========== ===========
</TABLE>
A-37
<PAGE>
NMT MEDICAL, INC. (FORMERLY NITINOL MEDICAL TECHNOLOGIES, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Segment Signficant Noncash Items:
Core technologies products $ 8,165,369 $ 5,397,242 $ 2,642,707
Neurosurgical products -- -- --
------------ ----------- -----------
Total $ 8,165,369 $ 5,397,242 $ 2,642,707
============ =========== ===========
Segment Income (Loss):
Core technologies products $(14,455,968) $(5,378,440) $(1,837,991)
Neurosurgical products (1,302,000) (421,000) --
------------ ----------- -----------
Total net loss $(15,757,968) $(5,799,440) $(1,837,991)
============ =========== ===========
</TABLE>
Segment balance sheet information is as follows as of December 31, 1999 and
1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Segment Long-Lived Tangible Assets:
Core technologies products $ 3,963,402 $ 3,682,017
Neurosurgical products 9,577,233 8,995,233
----------- -----------
Total $13,540,635 $12,677,250
=========== ===========
</TABLE>
(17) VALUATION OF QUALIFYING ACCOUNTS
The following table sets forth the activity in the Company's allowance for
doubtful accounts and sales returns:
<TABLE>
<CAPTION>
BALANCE AT PROVISION FOR UNCOLLECTIBLE
YEARS ENDED BEGINNING OF BAD DEBT AND AMOUNTS OTHER BALANCE AT END
DECEMBER 31, PERIOD RETURNS WRITTEN OFF ADDITIONS OF PERIOD
------------ ------ ------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
1997 17,000 108,000 -- -- 125,000
1998 125,000 596,000 (5,000) 155,000* 871,000
1999 871,000 185,000 (143,000) -- 913,000
</TABLE>
* represents additions arising from the acquisition of ENI, net of reserves
reclassified to net assets from discontinued operations.
A-38
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
2.1 Purchase Agreement, dated as of May, 1998, between the company and
Elekta AB (PUBL), as amended by Amendment No. 1 dated as of July 8,
1998. (4)
2.2 Purchase Agreement by and among the Company, NMT NeuroSciences (US),
Inc., NMT NeuroSciences Holdings (UK) Ltd., NMT NeuroSciences (UK)
Ltd., Spembly Medical Ltd., Spembly Cryosurgery Ltd., Swedemed AB,
Integra Neurosciences Holdings (UK) Ltd., and Integra Selector
Corporation, dated as of March 20, 2000.
2.3 Asset Purchase Agreement by and among NMT NeuroSciences (US), Inc.,
the Company and Integra Selector Corporation, dated as of March 20,
2000.
3.1 Second Amended and Restated Certificate of Incorporation. (5)
3.2 Certificate of Amendment to the Company's Second Amended and Restated
Certificate of Incorporation, as filed with the office of the
Secretary of State of the State of Delaware on June 3, 1999. (9)
3.3 Amended and Restated By-laws. (1)
4.1 Form of Common Stock Certificate.
4.2 Rights Agreement, dated as of June 7, 1999, between NMT Medical, Inc.
and American Stock Transfer & Trust Company, as Rights Agent, which
includes as Exhibit A, the form of Certificate of Designation, as
Exhibit B the form of Rights Certificate, and as Exhibit C, the
Summary of Rights to Purchase Preferred Stock. (8)
10.1 Stock Purchase Agreement by and among the Company, Whitney Equity
Partners, L.P., Boston Scientific Corporation, David J. Morrison,
Corporate Decisions, Inc., dated as of February 16, 1996. (1)
10.2 Registration Rights Agreement by and among the Company, Whitney
Equity Partners, L.P., Boston Scientific Corporation, David J.
Morrison, Corporate Decisions, Inc., dated as of February 16, 1996.
(1)
10.3 Agreement and Plan of Merger by and among the Company, NMT Heart,
Inc., InnerVentions, Inc. and Fletcher Spaght, Inc., dated as of
January 25, 1996. (1)
10.4 Stock Purchase Warrant by and between the Company and Fletcher
Spaght, Inc., dated as of July 1, 1998. (11)
10.5 Stock Purchase Warrant by and between the Company and David A.
Chazanovitz, dated as of July 1, 1998. (11)
10.6 Registration Rights Agreement by and between the Company and Fletcher
Spaght, Inc., dated as of February 14, 1996. (1)
10.6.1 Amendment No. 1, dated July 1, 1998 to the Registration Rights
Agreement by and between the Company and Fletcher Spaght, Inc., dated
as of February 14, 1996. (11)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
10.7 Distribution Agreement by and between the Company and the Bard
Radiology division of C.R. Bard, Inc., dated May 19, 1992, as amended
on February 1, 1993, and October 1, 1995. (1)(2)
10.8 International Distribution Agreement by and between the Company and
Bard International, Inc., dated as of November 30, 1995. (1)(2)
10.9 License and Development Agreement by and between the Company and
Boston Scientific Corporation, dated as of November 22, 1994. (1)(2)
10.10 Manufacturing Agreement by and between the Company and Lake Region
Manufacturing Company, Inc., dated February 15, 1996. (1)(2)
10.11 Technology Purchase Agreement by and between the Company and Morris
Simon, M.D., dated as of April 14, 1987. (1)(2)
10.12 Asset and Technology Donation and Transfer Agreement by and between
C.R. Bard, Inc. and Children's Medical Center Corporation dated as of
May 12, 1995. (1)
10.13 Stock Transfer Agreement by and between Children's Medical Center
Corporation and InnerVentions, Inc., dated as of June 19, 1995. (1)
10.14 License Agreement by and between Children's Medical Center
Corporation and InnerVentions, Inc., dated June 19, 1995. (1)(2)
10.15 Sublicense Agreement by and between Children's Medical Center
Corporation and InnerVentions, Inc., dated June 19, 1995. (1)
10.16 Assignment Agreement by and between the Company and The Beth Israel
Hospital Association, dated June 30, 1994. (1)
10.17 License Agreement by and between the Company and Lloyd A. Marks,
dated as of April 15, 1996. (1)(2)
10.18 Share Purchase Warrant by and between the Company and Lloyd A. Marks,
dated April 15, 1996. (1)
10.19 Employment Agreement by and between the Company and Thomas M. Tully
dated January 1, 1999. (7) (**)
10.20 Registration Rights Agreement by and between the Company and Thomas
M. Tully, dated as of February 13, 1996. (1)
10.21 Employment Agreement by and between the Company and David
Chazanovitz, dated February 13, 1996, as amended as of June 15, 1996.
(1)(**)
10.21.1 Amendment to Employment Agreement by and between the Company and
David Chazanovitz, dated July 9, 1996. (1)(**)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
10.22 Employment Agreement by and between the Company and David Chazanovitz
dated July 1, 1998. (7) (**)
10.23 Employment Agreement by and between the Company and Stephen J.
Kleshinski, dated July 22, 1993, as supplemented by agreement dated
as of June 1, 1994. (**)
10.24 Form of Registration Rights Agreement between the Company and certain
of its existing stockholders, dated as of February 14, 1996. (1)
10.25 Agreement of Lease by and between the Company and the Trustees of
Wormwood Realty, dated as of May 8, 1996. (1)
10.26 Company 1994 Stock Option Plan. (1)(**)
10.27 Company 1996 Stock Option Plan. (1)(**)
10.28 Amendment No. 1 to 1996 Stock Option Plan. (5)(**)
10.29 Company 1996 Stock Option Plan for Non-Employee Directors. (1)(**)
10.30 Company 1998 Stock Incentive Plan (5)(**)
10.31 Subordinated Note and Common Stock Purchase Agreement by and among
the Company, Whitney Subordinated Debt Fund, L.P. and, for certain
purposes, J.H. Whitney & Co., dated as of July 8, 1998. (4)
10.32 Guarantee and Collateral Agreement made by the Company and certain of
its Subsidiaries in favor of J.H. Whitney & Co., as Agent, dated as
of July 8, 1998. (4)
10.33 Amendment No. 1 dated April 14, 1999 to Subordinated Note and Common
Stock Purchase Agreement of July 8, 1998 by and among the Company,
Whitney Subordinated Debt Fund, L.P., and, for certain purposes, J.H.
Whitney & Co. (7)
10.34 Waiver No. 1 dated April 14, 1999 by and among the Company and
Whitney Subordinated Debt Fund, L.P. (7)
10.35 Registration Rights Agreement among the Company, Whitney Subordinated
Debt Fund, L.P. and J.H. Whitney & Co., dated as of July 8, 1998. (4)
10.36 Consulting Agreement between the Company and Morris Simon, M.D.,
dated February 27, 1998. (6)
10.37 Assignment Agreement between the Company and Morris Simon, M.D.,
dated February 27, 1998. (6)
10.38 Stock Option Agreement evidencing grant by the Company to Morris
Simon, M.D., dated February 27, 1998. (6)
10.39 Non-plan Stock Option Agreement evidencing grant by the Company to
Morris Simon, M.D., dated February 27, 1998. (6)
10.40 Registration Rights Agreement entered into by and among the Company
and Morris Simon, M.D., dated February 27, 1998. (6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
10.41 Registration Rights Agreement dated as of March 30, 1999 by and among
the Company and the individuals listed on Schedule A thereto. (7)
10.42 Amendment dated May 12, 1999 to Waiver No. 1 dated April 14, 1999 by
and among the Company and Whitney Subordinated Debt Fund, L.P. (7)
10.43 Amendment No. 2 dated November 9, 1998 to Purchase Agreement between
the Company and Elekta AB (Publ.) of May 8, 1998. (7)
10.44 Amendment No. 1 dated as of March 30, 1999 to Registration Rights
Agreement among the Company, Whitney Equity Partners, Boston
Scientific Corporation, David J. Morrison and Corporate Decisions,
Inc. of February 16, 1996. (7)
10.45 Amendment No. 1 dated as of March 30, 1999 to Registration Rights
Agreement among the Company, Whitney Subordinated Debt Fund, L.P. and
J.H. Whitney & Co. of July 8, 1998. (7)
10.46 Common Stock Purchase Warrant No. WSDF-4. (9)
10.47 Credit Agreement, dated as of September 13, 1999, among NMT Medical,
Inc., NMT Heart, Inc., NMT Investments Corp., NMT NeuroSciences
(International), Inc., NMT NeuroSciences (US), Inc., NMT
NeuroSciences (IP), Inc. and NMT NeuroSciences Innovasive Systems,
Inc., as Borrowers, and Brown Brothers Harriman & Co., as Lender (10)
10.48 $5 Million Promissory Note, dated as of September 13, 1999, issued by
NMT Medical, Inc., NMT Heart, Inc., NMT Investments Corp., NMT
NeuroSciences (International), Inc., NMT NeuroSciences (US), Inc.,
NMT NeuroSciences (IP), Inc. and NMT Neurosciences Innovasive
Systems, Inc. in favor of Brown Brothers Harriman & Co. (10)
10.49 Guarantee, dated as of September 13, 1999, made by NMT Medical, Inc.,
NMT Heart, Inc., NMT Investments Corp., NMT NeuroSciences
(International), Inc., NMT NeuroSciences (US), Inc., NMT
NeuroSciences (IP), Inc. and NMT NeuroSciences Innovasive Systems,
Inc. in favor of Brown Brothers Harriman & Co. (10)
10.50 Security Agreement, dated as of September 13, 1999, between NMT
Medical, Inc., NMT Heart, Inc., NMT Investments Corp., NMT
NeuroSciences (International), Inc., NMT NeuroSciences (US), Inc.,
NMT NeuroSciences (IP), Inc. and NMT NeuroSciences Innovasive
Systems, Inc., as Debtors, and Brown Brothers Harriman & Co., as
Lender. (10)
10.51 Collateral Patent Assignment, dated as of September 13, 1999, made by
NMT Medical, Inc. in favor of Brown Brothers Harriman & Co. (10)
10.52 Pledge Agreement, dated as of September 13, 1999, between NMT
Medical, Inc., NMT Heart, Inc., NMT Investments Corp., NMT
NeuroSciences (International), Inc., NMT NeuroSciences (US), Inc.,
NMT NeuroSciences (IP), Inc. and NMT NeuroSciences Innovasive
Systems, Inc., as Pledgors, and Brown Brothers Harriman & Co., as
Lender. (10)
10.53 Amendment No. 2 to Subordinated Note and Common Stock Purchase
Agreement, dated as of September 13, 1999, by and among NMT Medical,
Inc., Whitney Subordinated Debt Fund, L.P. and, for certain purposes,
J.H. Whitney & Co. (10)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
10.54 $6 Million Subordinated Promissory Note, dated as of July 8, 1998,
issued by NMT Medical, Inc. in favor of Whitney Subordinated Debt
Fund, L.P. (10)
10.55 Letter Agreement of Waiver of Compliance with Certain Covenants under
Credit Agreements, dated as of November 15, 1999, by and among NMT
Medical, Inc., NMT Heart, Inc., NMT Investments Corp., NMT
NeuroSciences (International), Inc., NMT NeuroSciences (US), Inc.,
NMT NeuroSciences (IP), Inc. and NMT Neurosciences Innovasive
Systems, Inc., as Borrowers, and Brown Brothers Harriman & Co., as
Lender. (10)
10.56 Waiver No. 2, made as of November 12, 1999, by and between NMT
Medical, Inc. and Whitney Subordinated Debt Fund, L.P. (10)
10.57 Waiver and Consent Agreement by and among Brown Brothers Harriman &
Co., J.H. Whitney & Co., Whitney Subordinated Debt Fund, L.P. and the
Borrowers named therein, dated as of March 20, 2000.
10.58 Common Stock Purchase Warrant No. BBH-1.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule.
</TABLE>
(1) Incorporated by reference to Exhibits to the Registrant's Registration
Statement on Form S-1 (File No. 333-06463).
(2) Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
(3) Incorporated by reference to Exhibits to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997.
(4) Incorporated by reference to Exhibits to the Registrant's Current Report on
Form 8-K, dated July 8, 1998.
(5) Incorporated by reference to Exhibits to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998.
(6) Incorporated by reference to Exhibits to the Registrant's Amended Quarterly
Report on Form 10-Q/A for the quarter ended April 31, 1998.
(7) Incorporated by reference to Exhibits to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 30, 1999.
(8) Incorporated by reference to Exhibits to the Registrant's Current Report on
Form 8-K, dated June 7, 1999.
(9) Incorporated by reference to Exhibits to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999.
(10) Incorporated by reference to Exhibits to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999.
(11) Incorporated by reference to Exhibits to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998.
(**) Management contract or compensatory plan or arrangement required to be
filed as an Exhibit to this Annual Report on Form 10-K.
<PAGE>
Exhibit 2.2
PURCHASE AGREEMENT
Among
NMT MEDICAL, INC.,
NMT NEUROSCIENCES (US), INC.
NMT NEUROSCIENCES HOLDINGS (UK) LTD.,
NMT NEUROSCIENCES (UK) LTD.,
SPEMBLY MEDICAL LTD.,
SPEMBLY CRYOSURGERY LTD.,
SWEDEMED AB,
INTEGRA NEUROSCIENCES HOLDINGS (UK) LTD.
and
INTEGRA SELECTOR CORPORATION
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TABLE OF CONTENTS
Page
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1. DEFINITIONS........................................................ 1
2. PURCHASE AND SALE Of SHARES AND US-BASED ASSETS;
ADJUSTMENTS; LIABILITIES........................................... 8
2.1 PURCHASE AND SALE............................................. 8
2.2 CLOSING PAYMENTS; CERTAIN EXCLUDED PAYMENTS................... 9
2.3 ADJUSTMENT TO PURCHASE PRICE.................................. 10
2.4 AGREEMENT REGARDING CERTAIN ACCOUNTS RECEIVABLES.............. 12
2.5 ACQUIRED AND EXCLUDED LIABILITIES............................. 12
2.6 CONSENTS...................................................... 13
3. REPRESENTATIONS AND WARRANTIES OF PARENT, SELLER AND
NMT-US.............................................................. 13
3.1 ORGANIZATION, POWER, EXECUTION................................ 14
3.2 NO VIOLATION.................................................. 15
3.3 CAPITALIZATION; VALIDITY OF THE SHARES........................ 15
3.4 AUTHORIZATIONS; COMPLIANCE.................................... 16
3.5 FINANCIAL STATEMENTS; NO LIABILITIES.......................... 16
3.6 ABSENCE OF CERTAIN CHANGES.................................... 18
3.7 TAXES......................................................... 20
3.8 CONTRACTS, LICENSES, ETC...................................... 24
3.9 INTELLECTUAL PROPERTY......................................... 26
3.10 LABOR MATTERS................................................. 28
3.11 EMPLOYEE BENEFIT PLANS........................................ 29
3.12 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS...................... 30
3.13 INSURANCE..................................................... 31
3.14 RELATED PARTY RELATIONSHIPS................................... 32
3.15 OWNERSHIP OF TANGIBLE ASSETS AND LEASES....................... 32
3.16 BROKERS-SELLERS............................................... 34
3.17 LITIGATION.................................................... 34
3.18 PRODUCT WARRANTY AND PRODUCT LIABILITY CLAIMS................. 35
3.19 ENTERPRISE RESOURCE PLANNING SOFTWARE......................... 35
3.20 ELEKTA AGREEMENT.............................................. 35
3.21 INVENTORY..................................................... 36
3.22 CERTIFICATIONS; PRODUCT SAFETY................................ 36
3.23 CUSTOMERS, SUPPLIERS AND LICENSORS............................ 36
3.24 EXPORT........................................................ 37
3.25 [INTENTIONALLY OMITTED]....................................... 37
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND ISC..................... 37
4.1 ORGANIZATION, POWER, EXECUTION................................ 37
4.2 NO VIOLATION.................................................. 37
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4.3 BROKERS-BUYER AND ISC.......................................... 38
5. COVENANTS............................................................ 38
5.1 CONDUCT OF THE BUSINESS........................................ 38
5.2 CERTAIN CHANGES................................................ 38
5.3 ACCESS TO INFORMATION.......................................... 39
5.4 EMPLOYEES...................................................... 40
5.5 EXCLUSIVITY.................................................... 41
5.6 LIMITATIONS ON EMPLOYEE SOLICITATION AND COMPETITION........... 41
5.7 EMPLOYEE NOTIFICATION.......................................... 42
5.8 AGREEMENT ON TRANSFER OF INVENTORY, OTHER ASSETS, ETC. ........ 42
5.9 ACCOUNTING REFERENCE DATE CHANGE; SCHEDULES; SALES AND
TRANSFER TAXES; FEES........................................... 43
5.10 RIGHT TO "NEUROSCIENCES" NAME; USE OF "NMT" NAME............... 44
5.11 SECTION 338 ELECTION........................................... 45
5.12 CONTINUATION OF PARENT INSURANCE COVERAGE...................... 45
5.13 AGREEMENT REGARDING ACCOUNTS RECEIVABLE........................ 45
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND ISC................. 45
6.1 REPRESENTATIONS AND WARRANTIES OF PARENT, SELLER, NMT-US....... 46
6.2 COVENANTS OF PARENT, SELLER, NMT-US AND ACQUIRED COMPANIES..... 46
6.3 NO INJUNCTION, ETC............................................. 46
6.4 ABSENCE OF ADVERSE CHANGES..................................... 46
6.5 FINANCIAL ACCOUNTING SYSTEM.................................... 46
6.6 PRE-CLOSING DIVIDEND........................................... 46
6.7 OTHER DELIVERIES............................................... 46
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARENT, SELLER AND
NMT-US............................................................... 47
7.1 REPRESENTATIONS AND WARRANTIES OF BUYER AND ISC................ 47
7.2 COVENANTS OF BUYER AND ISC..................................... 47
7.3 NO INJUNCTION, ETC............................................. 47
7.4 OTHER DELIVERIES............................................... 47
8. PUBLICITY............................................................ 47
9. CONFIDENTIALITY...................................................... 48
10. COOPERATION.......................................................... 48
11. TERMINATION.......................................................... 49
11.1 BOTH PARTIES................................................... 49
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11.2 BUYER.................................................. 49
11.3 PARENT................................................. 49
11.4 EFFECT OF TERMINATION.................................. 50
12. CLOSING
12.1 TIME AND PLACE OF CLOSING.............................. 50
12.2 PARENT/SELLER/NMT-US CLOSING DELIVERIES................ 50
13. [INTENTIONALLY OMITTED]...................................... 54
14. INDEMNIFICATION.............................................. 54
14.1 INDEMNIFICATION BY PARENT AND SELLER................... 54
14.2 INDEMNIFICATION BY BUYER AND ISC....................... 54
14.3 TAX INDEMNIFICATION AND OTHER TAX MATTERS.............. 55
14.4 LIMITATIONS ON INDEMNIFICATION......................... 56
14.5 CLAIMS FOR INDEMNIFICATION............................. 57
14.6 DEFENSE BY INDEMNIFYING PARTY.......................... 57
14.7 PAYMENT OF INDEMNIFICATION OBLIGATION.................. 58
14.8 EXCLUSIVE REMEDY....................................... 58
14.9 ELEKTA AGREEMENT....................................... 58
15. ADDITIONAL ACTIONS........................................... 58
15.1 SERVICES............................................... 58
15.2 ADDITIONAL AGREEMENTS.................................. 59
16. GENERAL...................................................... 60
16.1 [INTENTIONALLY OMITTED]................................ 60
16.2 PAYMENT OF EXPENSES.................................... 60
16.3 MODIFICATIONS; WAIVERS................................. 60
16.4 ASSIGNABILITY.......................................... 60
16.5 NO OTHER REPRESENTATIONS............................... 60
16.6 NOTICES................................................ 61
16.7 CAPTIONS............................................... 62
16.8 COUNTERPARTS........................................... 62
16.9 KNOWLEDGE.............................................. 62
16.10 GOVERNING LAW......................................... 62
17. ENTIRE AGREEMENT............................................. 62
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<TABLE>
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<S> <C>
ARTICLE VIII..................................................................................................................... 13
CONDITIONS TO BUYER'S OBLIGATIONS................................................................................................ 13
8.1 Representations, Warranties and Covenants. All representations and warranties of Seller and
Parent contained in Article IV of this Agreement shall have been true and correct as of the date
of this Agreement and shall be true and correct in all material respects (without duplication of
any materiality qualifier contained therein) as of the Closing Date, and Seller and Parent shall
have performed in all material respects all covenants required by this Agreement to be performed
by any of them as of or before the Closing....................................................................................... 13
8.2 No Actions With Respect to Transactions. No Action shall have been instituted or threatened by
any governmental authority or other Person that challenges, seeks damages in connection with, or
seeks to restrain, any of the transactions contemplated by this Agreement........................................................ 13
8.3 Noncompetition Agreement. Each of Seller and Parent shall have executed and delivered to Buyer
the Noncompetition Agreement..................................................................................................... 13
8.4 Closing Documents. Seller and Parent shall have delivered to Buyer the documents shown in the
Closing Agenda as being delivered by them, and such other instruments and documents as may be
reasonably requested by Buyer, all in form reasonably satisfactory to Buyer's counsel............................................ 13
8.5 No Material Adverse Change. There shall have been no Material Adverse Change since the Reference
Date............................................................................................................................. 13
ARTICLE IX....................................................................................................................... 14
TERMINATION BEFORE CLOSING....................................................................................................... 14
9.1 Termination. This Agreement may be terminated by notice at any time prior to Closing:................................... 14
9.2 In the Event of Termination. In the event of termination of this Agreement:............................................. 14
ARTICLE XI....................................................................................................................... 15
SURVIVAL AND INDEMNIFICATION..................................................................................................... 15
11.1 Survival of Representations. The representations and warranties of the parties made in this
Agreement shall survive the Closing for a period from the Closing to the 18 month anniversary of
the Closing Date (or until resolution of any Indemnity Claim made on or before such date), except
for the representations and warranties made in Section 4.7 with respect to title, which shall
survive the Closing without limitation........................................................................................... 15
11.2 Indemnification.......................................................................................................... 16
ARTICLE XII...................................................................................................................... 18
MISCELLANEOUS.................................................................................................................... 18
12.1 Employees. Buyer shall have no obligation to hire any of Seller's employees............................................. 18
A. Agreements................................................................................................................. 6
</TABLE>
EXHIBITS
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1.1(a) Financial Statements
1.1(b) Terms of Noncompetition Agreement
2.5 Allocation of Purchase Price
7.4 Closing Agenda
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PURCHASE AGREEMENT
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PURCHASE AGREEMENT (this "Agreement"), executed as of this 20th day of
March, 2000, by and among NMT MEDICAL, INC., a Delaware corporation formerly
known as Nitinol Medical Technologies, Inc. ("Parent"), NMT NEUROSCIENCES (US),
INC., a Delaware corporation and wholly-owned subsidiary of Parent ("NMT-US"),
NMT NEUROSCIENCES HOLDINGS (UK) LTD., a corporation organized under the laws of
England and an indirect wholly-owned subsidiary of Parent ("Seller"), NMT
NEUROSCIENCES (UK) LTD., a corporation organized under the laws of England and
Wales and a wholly-owned subsidiary of Seller ("Neurosciences"), SPEMBLY MEDICAL
LTD., a corporation organized under the laws of England and Wales and a wholly-
owned subsidiary of Neurosciences ("Spembly"), SPEMBLY CRYOSURGERY LTD, a
corporation organized under the laws of England and Wales and a wholly-owned
subsidiary of Spembly ("Spembly-Cryosurgery"), SWEDEMED AB, a corporation
organized under the laws of Sweden and a wholly-owned subsidiary of
Neurosciences ("Swedemed" and, together with Neurosciences, Spembly and Spembly-
Cryosurgery, collectively, the "Acquired Companies" and each, individually, an
"Acquired Company"), INTEGRA NEUROSCIENCES HOLDINGS (UK) LTD., a corporation
organized under the laws of England and Wales ("Buyer"), and INTEGRA SELECTOR
CORPORATION, a Delaware corporation ("ISC").
WITNESSETH:
WHEREAS, the Acquired Companies are engaged primarily in the neurosurgical
and cryogenic surgical instrument business, with their principal manufacturing
and production operations located in Andover, England;
WHEREAS, NMT-US is the owner of various assets, rights and properties
related to the business of the Acquired Companies located in the United States;
WHEREAS, Seller is willing to sell to Buyer, and Buyer desires to purchase
from Seller, all of the issued and outstanding capital shares of the Acquired
Companies; and
WHEREAS, NMT-US is willing to sell to ISC, and ISC desires to purchase from
NMT-US, all of the assets, rights and properties related to the business of the
Acquired Companies located in the United States.
NOW THEREFORE, in consideration of the mutual premises, covenants,
agreements, representations and warranties contained herein, the parties hereto
agree as follows:
1. DEFINITIONS. In this Agreement the following terms shall have the meanings
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assigned to them below.
"Acquired Company" and "Acquired Companies" shall have the meaning set
forth in the preamble.
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"Acquired Liabilities" shall have the meaning set forth in Section 2.5(a)
hereof.
"Affiliate" of a specified Person (natural or juridical) shall mean a
Person that directly, or indirectly through one or more intermediaries,
controls, was controlled by, or was under common control with, the Person
specified at December 31, 1999 or any time since such date.
"Agreement" shall have the meaning set forth in the preamble.
"Andover Facility" shall mean the facility of the Business at Newbury Road,
Hampshire, England located on the Real Property.
"Assets" shall mean all assets and contractual or other rights used or
directly related to the Business, whether owned, directly or of record, by any
of Parent, NMT-US, Seller, any Acquired Company or any of their respective
Affiliates, including, without limitation, the property described on Exhibit A
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attached hereto, but excluding the Excluded Assets, with only such changes
therein as shall have occurred between the Reference Date and the Closing Date
in the ordinary course of business consistent with the Acquired Companies' past
practice and in transactions not inconsistent with any of the representations,
warranties, covenants or agreements of Parent, Seller or any of the Acquired
Companies set forth herein.
"Auditor" shall have the meaning set forth in Section 2.3(b) hereof.
"Authorizations" shall have the meaning set forth in Section 3.4 hereof.
"Barclays Debt" shall mean any and all indebtedness (principal and
interest), charges, fees, prepayment penalties and other amounts now or
hereafter due and owing under that certain Treasury Loan Facility, dated as of
April 18, 1998, between Barclays Bank PLC and Spembly, and any overdraft
facility maintained by any of the Acquired Companies with Barclays Bank PLC.
"Business" shall mean the research, development, manufacturing, marketing,
selling and distribution business conducted or currently proposed to be
conducted by the Acquired Companies and their respective Affiliates related to,
or with respect to, the Products.
"Business Day" shall mean any day banks are open for business in New York
City, New York.
"Buyer" shall have the meaning set forth in the preamble.
"Buyer Indemnified Parties" shall have the meaning set forth in Section
14.1 hereof.
"Chameleon Payment" shall have the meaning set forth in Section 2.2(c).
"Closing" shall have the meaning as set forth in Section 12.1.
"Closing Date" shall mean the date on which the Closing takes place. The
Closing shall be effective as of the close of business, local time, on the
Closing Date.
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"Closing Date Balance Sheet" shall mean the balance sheet of the Business
described in Section 2.3(a) hereof.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
"Confidential Information" shall mean any confidential, proprietary or
secret knowledge, information or data regarding the Business or any of the
Acquired Companies, Products or Assets, including, without limitation, any and
all customers lists, customer leads, financial information, trade secrets,
market information or studies, designs, analyses and similar materials, except
for such knowledge, information and data as is generally available to the public
other than as a result of the unauthorized disclosure by any Person.
"Continued Employee Payment" shall have the meaning set forth in Section
2.2(c).
"Contract" shall mean any contract, lease, agreement, plan, policy, note,
bond, indenture, license, mortgage or security instrument, arrangement,
obligation or commitment, whether in writing, oral or otherwise.
"Copyrights" shall mean all copyrights, assignments of copyrights, design
rights, rights to mask works and database rights, and all registrations and
applications for registration of any of the foregoing.
"Critical Consents" shall have the meaning set forth in Section 2.6(c)
hereof.
"Damages" shall have the meaning set forth in Section 14.1 hereof.
"Disclosure Schedules" shall have the meaning set forth in Section 3
hereof.
"Distribution Arrangement" shall have the meaning set forth in Section
3.8(b) hereof.
"Election" shall have the meaning set forth in Section 5.11 hereof.
"Elekta" shall mean Elekta AB (publ), a Swedish company and the former
owner of the Business.
"Elekta Agreement" shall have the meaning set forth in Section 3.20 hereof.
"Elekta Payables" shall have the meaning set forth in Section 2.4(a)
hereof.
"Elekta Receivables" shall have the meaning set forth in Section 2.4(a)
hereof.
"Employee Benefit Plans" shall mean all pension, retirement, profit
sharing, deferred compensation, stock ownership, stock purchase, stock option,
share option, restricted stock, bonus, severance or termination pay, redundancy,
cafeteria, medical, hospital, life, health, accident, disability, death, tuition
reimbursement or other employee benefit plans, schemes or arrangements.
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"Environmental Laws" shall mean any applicable Law, Order or Permit or
other binding determination (whether national, provincial, departmental, state
or local) pertaining to (i) the use, analysis, generation, manufacture, storage,
discharge, release, disposal or transportation of Hazardous Materials, (ii) the
health and safety of employees and the public, (iii) environmental regulation,
or (iv) with respect to Hazardous Materials, contamination, clean-up or
disclosure, drinking water, exposure, release, groundwater, landfills, open
dumps, storage tanks (underground or otherwise), solid or liquid waste, waste
water, stormwater runoff, emissions or wells.
"Exchange Act" shall mean the United States Securities Exchange Act of
1934, as amended.
"Excluded Assets" shall mean the property described on Exhibit B hereto.
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"Excluded Employees" shall have the meaning set forth in Section 3.11(h)
hereof.
"Excluded Liability Assumption Agreement" shall have the meaning set forth
in Section 2.5(b) hereof.
"Excluded Liabilities" shall have the meaning set forth in Section 2.5(b)
hereof.
"GAAP" shall mean Generally Accepted Accounting Principles in effect in the
United States as of the relevant determination date consistently applied for all
periods covered thereby.
"Governmental Authority" shall mean any foreign, federal, state or local
court or other governmental, administrative, or regulatory, authority, agency,
department or body (including, without limitation, the United Kingdom Inland
Revenue and the United States Internal Revenue Service).
"Group Relief" shall have the meaning set forth in Section 3.7(r) hereof.
"Hazardous Materials" shall mean petroleum, including crude oil or any
fraction thereof, or any other chemical substance, material, object, condition,
waste, pollutant or combination thereof which is hazardous or potentially
hazardous, or designated as or deemed to be hazardous or potentially hazardous
under applicable Environmental Laws to human health or safety or to the
environment as a result of its radioactivity, ignitability, corrosivity,
reactivity, explosivity, toxicity, carcinogenicity, infectiousness or other
harmful or potentially harmful properties or effects and all of those chemicals,
substances, materials, objects, conditions, wastes, pollutants or combinations
thereof which are now listed, defined or regulated by any applicable law or
regulation (whether national, provincial, departmental, state or local) based
upon, directly or indirectly, such properties or effects.
"Improvements" shall mean, collectively, any and all buildings, fixtures
and other improvements located on the Real Property or located at the Andover
Facility.
"Indemnified Party" shall have the meaning set forth in Section 14.5
hereof.
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"Indemnifying Party" shall have the meaning set forth in Section 14.5
hereof.
"Insurance Policies" shall have the meaning set forth in Section 3.13
hereof.
"Intergroup Receivables" shall have the meaning set forth in Section 2.4(a)
hereof.
"ISC" shall have the meaning set forth in the preamble.
"Intellectual Property" shall mean any and all Copyrights, Patents, Know-
How, and Trademarks, and all rights (including, without limitation, moral
rights) vesting in the owner thereof pursuant to the applicable Laws of any
competent jurisdiction.
"Know-How" shall mean methods, devices, technology, trade secrets,
industrial designs, know-how, show-how, technical and training manuals and
documentation and other proprietary information, including, without limitation,
proprietary processes, designs and formulae.
"Law" shall mean any law, statute, regulation, rule, ordinance, Order,
consent decree, settlement agreement, common law precedent, or governmental
requirement, and any judgment, decision, decrees, writ, injunction, award,
ruling or order of any court or Governmental Authority.
"Liability" means any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, cost, fee or expense (including costs of
investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any security interest, lien, mortgage, pledge,
hypothecation, adverse claim, charge, encumbrance, preemptive right, conditional
sale agreement, deed of trust or conveyance to secure debt, of any nature
whatsoever and regardless of how created or arising.
"Material Adverse Effect" shall mean an event, change, or occurrence which,
together with any other event, change, or occurrence, individually or in the
aggregate, has a material adverse effect or impact on (i) the financial
position, business or results of operations of Acquired Companies, and the value
of the US-Based Assets, taken as a whole, or (ii) the ability of Parent, NMT-US,
Seller and/or any of the Acquired Companies to perform their obligations under
this Agreement and the Related Agreements or to consummate the transactions
contemplated hereby or thereby.
"Net Worth" shall mean, with respect to (a) the Reference Date Balance
Sheet and the Reference Date, the amount of US$3,022,000, and (b) with respect
to the Closing Date Balance Sheet and the Closing Date, the adjusted amount of
"TOTAL ASSETS" minus the amount "TOTAL LIABILITIES" in each case as are set
forth on the Closing Date Balance Sheet.
"Neurosciences" shall have the meaning set forth in the preamble.
"NMT-US" shall have the meaning set forth in the preamble.
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"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local, or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Governmental Authority.
"Parent" shall have the meaning set forth in the preamble.
"Patents" shall mean patents and patent applications, all continuations,
continuations-in-part, divisions, reissues, reexaminations, extensions and
foreign counterparts of such patents and patent applications, and all invention
disclosures and rights in inventions.
"Pension Scheme" shall mean The Surgical Technology Group Pension and Life
Assurance Scheme, as amended and in effect on the date hereof and at the Closing
Date.
"Permit" shall mean any national, federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
assets, or business.
"Person" shall mean any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
Governmental Authority, joint venture, estate, trust, association, organization
or other entity of any kind or nature.
"Post-Closing Period" shall have the meaning set forth in Section 14.3(a)
hereof.
"Pre-Closing Dividend" shall have the meaning set forth in Section 5.2(e)
hereof.
"Pre-Closing Period" shall have the meaning set forth in Section 14.3(a)
hereof.
"Products" shall mean the products manufactured, assembled, repaired,
developed, created, invented or researched by or on behalf of the Acquired
Companies, including, without limitation, the Selector(TM) Ultrasonic Aspirator,
cryosurgical and TNS product lines, products in the research and development
stage, and such other products as more particularly identified on the Schedule
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of Products attached hereto.
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"Purchase Price" shall have the meaning set forth in Section 2.2(a) hereof.
"Purchase Price Adjustment" shall have the meaning set forth in Section
2.3(c) hereof.
"Real Property" shall mean the real property described on Schedule
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3.15(b)(i) hereto on which the Andover Facility is located, and which is leased
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from The Borough Council of Test Valley by Spembly.
"Reference Date" shall mean December 31, 1999.
"Reference Date Balance Sheet" shall mean the adjusted balance sheet of the
Business as of the Referenced Date attached hereto as Exhibit C.
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"Registered Intellectual Property" shall have the meaning set forth in
Section 3.9(b).
"Release" shall mean any intentional, negligent or accidental spilling,
leaking, pumping, pouring, emitting, emptying, exposure, discharging, injecting,
escaping, leaching, dumping, or disposing of any Hazardous Materials (including
the abandonment or discarding of barrels, containers and other closed
receptacles containing any Hazardous Materials).
"Related Agreements" shall have the meaning set forth in Section 3.1(a).
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the United States Securities Act of 1933, as
amended.
"Seller" shall have the meaning set forth in the preamble.
"Seller Indemnified Parties" shall have the meaning set forth in Section
14.2 hereof.
"Share Payment" shall have the meaning set forth in Section 2.2(a) hereof
"Shares" shall mean all the issued and outstanding shares in the capital of
Neurosciences, all of which shall be transferred to Seller at the Closing.
"Spembly" shall have the meaning set forth in the preamble.
"Spembly-Cryosurgery" shall have the meaning set forth in the preamble.
"Stub Tax Period" shall mean the Tax period (or any portion thereof)
commencing on January 1, 2000 and ending on the Closing Date.
"Swedemed" shall have the meaning set forth in the preamble.
"TA" shall have the meaning set forth in Section 3.7(p).
"Tax" shall mean with respect to any Person, any tax, estimated tax,
withholding tax, assessment, levy, impost, fee or other charge, however
denominated, including any interest, penalties, additions to tax or additional
amounts that may become payable in respect thereof, imposed by any Governmental
Authority, which tax shall include, without limitation, any income tax, payroll
and employee withholding tax, unemployment insurance, social security, sales and
use tax, franchise tax, gross receipts tax, occupation tax, real and personal
property tax, transfer tax, workers' compensation, corporation tax, advance
corporation tax, national insurance and social security contributions, capital
gains tax, inheritance tax, value added tax, customs excise and import duties,
stamp duty, stamp duty reserve tax, insurance premium tax, air passenger duty,
landfill tax, petroleum revenue tax, advance petroleum revenue tax, and gas levy
and other obligations of the same or of a similar nature, for which such Person
may be liable (including any such Tax related to any other Person for which such
Person is liable, by contract, as transferee or successor, by law (including as
a result of the application of Treasury Reg. Section 1.1502-6) or otherwise).
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"Tax Return" or "Return" shall mean any United Kingdom, United States or
foreign, federal, state, or local tax return, declaration, report, estimate,
information return, statement, claim for refund or form relating to Taxes,
including any schedule, computation, amendment or attachment thereto.
"TCGA" shall have the meaning set forth in Section 3.7(q) hereof.
"Trademarks" shall mean (a) registered trademarks and registered service
marks, applications for registration for trademarks and service marks, renewal
registrations and applications for renewal registrations, extensions and foreign
counterparts of such registrations and applications for registration; (b)
material unregistered trademarks and service marks; (c) corporate names,
business names and trade names, whether registered or unregistered; and (d)
Internet domain names and associated addresses and URL's, in each case together
with all goodwill associated therewith.
"Tradename" shall have the meaning set forth in Section 5.10.
"TULRC" shall have the meaning set forth in Section 3.10(a) hereof.
"US-Based Assets" shall mean those Assets which are owned by NMT-US or
otherwise located in the United States, including, without limitation, those
Assets identified on Exhibit A (US) hereto.
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"US-Based Assets Payment" shall have the meaning set forth in Section
2.2(a).
"1998/1999 Tax Make-Whole Payment" shall have the meaning set forth in
Section 2.2(c).
2. PURCHASE AND SALE OF SHARES AND US-BASED ASSETS; ADJUSTMENTS; LIABILITIES.
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2.1 PURCHASE AND SALE.
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(a) The Shares shall be transferred from Seller to Buyer as follows:
(i) At the Closing, upon the terms and subject to the conditions
of this Agreement, Seller as legal and beneficial owner and with full title
guarantee shall sell, and Buyer shall purchase, the Shares with effect from
Closing free from any Lien together with all accrued benefits and rights
attached thereto and all dividends declared after the Reference Date in respect
of the Shares.
(ii) Seller waives or agrees to procure the waiver of any rights
or restrictions conferred upon it or any other person which may exist in
relation to the Shares under the articles of association of Neurosciences or
otherwise.
(iii) Buyer shall not be obliged to close the purchase of any of
the Shares unless Seller closes the sale of all the Shares simultaneously, but
the closing of the
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purchase of some Shares shall not effect the rights of Buyer with respect
to its rights to the other Shares.
(b) At the Closing, upon the terms and subject to the conditions of this
Agreement, NMT-US, as the legal and beneficial owner of US-Based Assets, shall
sell, assign, transfer and convey the US-Based Assets to ISC, pursuant to a Bill
of Sale in substantially the form of Exhibit E-1 hereto.
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2.2 CLOSING PAYMENTS; CERTAIN EXCLUDED PAYMENTS.
--------------------------------------------
(a) Subject to Sections 2.2(c), 2.2(d) and 2.3, the aggregate purchase
price (the "Purchase Price") shall be: (i) US$7,300,000 for the Shares (as the
same may be reduced pursuant to Section 2.2(c), the "Share Payment"), and (ii)
US$700,000 for the US-Based Assets (the "US-Based Assets Payment"). Seller,
Parent, NMT-US and Buyer agree that this purchase price allocation shall be used
in all Tax and other filings with any Governmental Authority, and they shall not
take any position contrary unless required to do so pursuant to a determination
(as defined in Section 1313(a) of the Code or any provision similar to Section
1313(a)), in which event they shall provide prior written notice to the other
parties hereunder.
(b) Subject to Sections 2.2(c), 2.2(d) and 2.3, at the Closing Buyer
shall (i) pay to Seller (or Seller's designee) in cash or by wire transfer of
immediately available funds (to an account designated in writing not less than
three (3) business days prior to Closing) an amount equal to the Share Payment,
and (ii) ISC shall pay to NMT-US (or NMT-US's designee) in cash or by wire
transfer of immediately available funds (to an account designated in writing not
less than three (3) business days prior to Closing) an amount equal to the US-
Based Assets Payment.
(c) Notwithstanding the provisions of Sections 2.2(a) and 2.2(b) or any
other adjustments to the Purchase Price hereunder (including, without
limitation, any adjustments or payments pursuant to Sections 2.3 or 14 hereof),
the Share Payment shall be reduced on a dollar-for-dollar basis by (i) the
amount of the Liability incurred by the Acquired Companies with respect to the
continued employment by Neurosciences of Steve Sinyard for a period of four (4)
months following the Closing Date, including, without limitation, all amounts
now or hereafter payable by any of the Acquired Companies or Buyer to or on
behalf of, or in connection with the employment of, Steve Sinyard with respect
to salary, bonus, insurance, pension, other employee benefits, or severance,
termination or other redundancy payments (statutory or otherwise) (collectively,
the "Continued Employee Payment"), (ii) the amount of any Liability now or
hereafter incurred by the Acquired Companies in connection with the purchase and
installation of, and related pre-operational consultancy services for, a new
Chameleon brand integrated financial and accounting software system from Panacea
Limited (the "Chameleon Payment"), and (iii) the amount of any Liability in
respect of Taxes of any of the Acquired Companies for the Tax periods ended
December 31, 1998 and December 31, 1999 that is not properly and fully reflected
in the accrual therefor listed on the Reference Date Balance Sheet (or which was
not paid in full prior to the Reference Balance Sheet Date) (the "1998/1999 Tax
Make-Whole Payment"). Schedule 2.2(c) hereto sets forth Parent's good faith
estimate of the amount of each of the Continued Employee Payment, the Chameleon
Payment and the 1998/1999 Tax Make-Whole Payment as of the Closing Date,
together with reasonable detail of the calculation thereof, the aggregate amount
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of which the parties agree shall be deducted from the amount of the Share
Payment payable by Buyer to Seller (or Seller's designee) at the Closing
pursuant to Section 2.2(b). In the event that the actual amount of any of the
Continued Employee Payment, the Chameleon Payment or the 1998/1999 Tax Make-
Whole Payment exceeds the amount thereof set forth on Schedule 2.2(c), Buyer
shall notify Seller and Parent in writing of the amount of such excess (and
provide reasonable detail therefor), and Seller and Parent shall immediately pay
to Buyer (or Buyer's designee) the full amount thereof. The parties agree that
this provision shall not be subject to any offset, deduction or thresholds as
may be applicable to other payments or rights to payments hereunder.
(d) To the extent that Buyer is required to withhold any amounts from
the Share Payment or the US-Based Assets Payment to satisfy any Tax withholding
obligations of any applicable Tax authority in connection with or as a result of
the transaction contemplated hereby, the amount of the Share Payment or the US-
Based Assets Payment shall be reduced by such amounts required to be withheld.
2.3 ADJUSTMENT TO PURCHASE PRICE.
-----------------------------
(a) Within ninety (90) calendar days after the Closing Date, a balance
sheet of the Business reflecting the assets and Liabilities of the Business as
of the close of business on the date immediately prior to the Closing Date
including a calculation of Net Worth will be prepared by Buyer and delivered to
Seller. Such balance sheet, as adjusted, is referred to herein as the "Closing
Date Balance Sheet." The Closing Date Balance Sheet shall be prepared in a
manner consistent with the Reference Date Balance Sheet (including with respect
to adjustment procedures, discretionary allocations and other judgments) and
shall reflect the consolidation of the assets and Liabilities of Acquired
Companies and the Business in accordance with GAAP; provided, however, that,
notwithstanding anything contained on the Reference Date Balance Sheet or herein
to the contrary, the Closing Date Balance Sheet (i) shall not include any
intercompany accounts as between any of the Acquired Companies, on the one hand,
and Parent or any subsidiary or Affiliate of Seller (other than the Acquired
Companies), on the other hand, including, without limitation, the Intergroup
Receivables; (ii) shall not include any purchase accounting adjustments; (iii)
shall not contain any Excluded Liabilities or any Liabilities related to
indebtedness (other than capital lease obligations), including, without
limitation, the Barclays Debt; (iv) shall not include any Liability underlying
the obligations of the Acquired Companies with respect to the Continued Employee
Payment or the Chameleon Payment (it being agreed that such Liabilities and
corresponding payments shall be determined and paid pursuant to Section 2.2(c));
(v) shall include only such inventory that is (A) reflected on the Reference
Date Balance Sheet or has been manufactured since the Reference Date, and (B)
located at the Andover Facility or such other locations designated by Buyer. All
foreign currency amounts shall be expressed in United States dollars using the
exchange rate and conversion mechanism as required by GAAP; and (vi) shall
include as an accrued expense for unpaid Taxes for the 1998 and 1999 Tax years
an amount equal to that shown on the Reference Date Balance Sheet for such Tax
years (for the avoidance of doubt, it is agreed among the parties that any
deficiencies of such accrual shall be resolved on a dollar-for-dollar basis
pursuant to the 1998/1999 Tax Make-Whole Payment under Section 2.2(c) or, as
necessary, the indemnification rights under Section 14.3). Parent shall have the
right to review the computations and work papers (including access to
accountants' work
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papers, subject to such confidentiality restrictions and indemnities as Buyer's
accountants shall reasonably request) and underlying books and records used in
connection with Buyer's preparation of the Closing Date Balance Sheet and to
have access to the key employees and independent accountants of Buyer in
connection therewith. Buyer shall maintain separate books and records for the
Business until such time as any post-Closing adjustment under this Section 2.3
has been paid by the relevant party.
(b) If Buyer and Parent cannot reach agreement with respect to the Closing
Date Balance Sheet and the determination of Net Worth within ten (10) days after
the delivery of the Closing Date Balance Sheet to Seller, Buyer and Parent shall
jointly appoint an internationally-recognized accounting firm (other than any
firm that has been engaged by Parent, Buyer or any of their Affiliates at any
time during the prior three (3) years) (the "Auditor") (the cost of which shall
be divided equally between Buyer and Parent) to determine the proper resolution
of the disagreements between Buyer and Parent concerning the Closing Date
Balance Sheet and the determination of Net Worth, whose determination shall be
made within thirty (30) days and shall be final and binding on the parties. If
Buyer and Parent cannot agree on the appointment of such a certified public
accounting firm, such firm shall be selected at random from a list comprised of
two firms chosen by Buyer and two firms chosen by Parent. The Auditor shall
resolve all disputes and disputed items as soon as practicable, provided that
the Auditor shall be bound by the provisions of Sections 2.2, 2.3 and 2.5, as
applicable, and may not assign a value to any item greater than the greatest
value for such item claimed by either party or less than the smallest value for
such item claimed by either party. Each of Buyer and Parent shall permit the
Auditor to have full access to the books, records, key employees and independent
accountants of Buyer and Parent and their respective subsidiaries and affiliates
in order to resolve any such disagreements. Unless the Auditor otherwise
directs, each of the parties shall be limited to an initial written presentation
to the Auditor and a written rebuttal. The parties shall present to the Auditor,
and shall exchange, initial presentation documents no later than twenty (20)
calendar days after retention or appointment of the Auditor pursuant to the
third and fourth sentences of this Section 2.3(b), as applicable, and shall
present to the Auditor, and shall exchange, written rebuttals no later than ten
(10) calendar days thereafter. All determinations made by the Auditor shall be
final, conclusive and binding on the parties.
(c) Within ten (10) calendar days after final determination of the Closing
Date Balance Sheet and the Net Worth as of the Closing Date, Parent and Seller
shall pay to Buyer the amount, if any, by which the Net Worth as of the
Reference Date (i.e., US$3,022,000) exceeds the Net Worth as of the Closing Date
(the "Purchase Price Adjustment"). The Purchase Price Adjustment shall be paid
by Parent or Seller to Buyer by wire transfer in immediately available funds to
an account designated in writing by Buyer. Notwithstanding the foregoing, Parent
shall not be required to make any payment pursuant to this Section 2.3(c) in the
event that the Purchase Price Adjustment is equal to or less than US$250,000;
provided, however that in the event that the Purchase Price Adjustment exceeds
US$250,000 Seller and Parent shall pay the entire amount of the Purchase Price
Adjustment in full, without regard to such threshold. The parties agree that to
the extent that any portion of a Purchase Price Adjustment required to be paid
hereunder is directly attributable to the diminution in value of the US-Based
Assets between the Reference Date and the Closing Date, Parent and NMT-US shall,
at the request of the Buyer, cause such portion of the Purchase Price Adjustment
to be paid directly to ISC, which amount
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shall be paid by Parent or NMT-US by wire transfer in immediately available
funds to an account designated in writing by ISC.
2.4 AGREEMENT REGARDING CERTAIN ACCOUNTS RECEIVABLES.
------------------------------------------------
(a) Notwithstanding the fact that all accounts receivable by the
Acquired Companies from Elekta (the "Elekta Receivables") are excluded from the
Assets and all accounts payable to Elekta (the "Elekta Payables") are Excluded
Liabilities, the parties hereby agree that the aggregate amount of accounts
receivable of the Acquired Companies from any Affiliate of Parent (other than
another Acquired Company) (the "Intergroup Receivables") shall be reduced, on a
dollar-for-dollar basis, by an amount equal to the amount, if any, by which the
Elekta Payables exceed the Elekta Receivables, in each case as such amounts
exist immediately prior to the Closing Date.
(b) Notwithstanding any provision herein to the contrary, Buyer hereby
agrees to assume, effective at the Closing, from the relevant obligor the
liability to pay the amount, if any, of any Intergroup Receivables that exist at
Closing, it being agreed that Buyer shall only assume payment liability for such
Intergroup Receivables to the extent that a corresponding and equivalent asset
is owned by the Acquired Companies at Closing. Buyer may assign its obligation
to assume such payment liability hereunder to one or more of its Affiliates
(other than the Acquired Companies).
2.5 ACQUIRED AND EXCLUDED LIABILITIES.
----------------------------------
(a) Notwithstanding the fact that the transaction contemplated hereby
is structured as a purchase of the Shares and the US-Based Assets, Buyer and ISC
shall acquire at the Closing only: (i) those Liabilities included on the Closing
Date Balance Sheet, and (ii) the obligations of the Acquired Companies under the
contracts listed on Schedule 3.8 attached hereto (collectively, the "Acquired
Liabilities"). Following the Closing, Buyer shall cause the Acquired Companies
to discharge and perform all obligations related to the Acquired Liabilities,
except to the extent that Buyer in good faith disputes the amount or existence
thereof.
(b) From and after the Closing, Seller, NMT-US and Parent shall retain
any and all Liabilities related to the Business other than the Acquired
Liabilities (collectively, the "Excluded Liabilities"), which shall include,
without limitation, each of those Liabilities set forth on Exhibit D attached
hereto, which Excluded Liabilities shall be explicitly assumed and retained by
Seller, NMT-US and Parent pursuant to an Assignment and Assumption of
Liabilities among Seller, Parent and each of the Acquired Companies in the form
attached hereto as Exhibit E-2 (the "Excluded Liability Assumption Agreement").
Seller, NMT-US and Parent shall discharge and perform, or cause to be discharged
and performed, all obligations related to the Excluded Liabilities, except to
the extent that Parent in good faith disputes the amount or existence thereof.
After Closing, none of Buyer, ISC, any of the Acquired Companies or any of their
respective Affiliates shall have any responsibility or Liability to Seller,
Parent or any other Person for any Excluded Liabilities.
2.6 CONSENTS.
---------
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(a) The parties and each of their respective Affiliates shall cooperate in
securing before and after the Closing all consents, approvals and authorizations
from, and providing all notices to, each Governmental Authority whose consent,
approval, authorization or receipt of notice is necessary to the sale, transfer
or assignment of the Shares, any of the Assets or the US-Based Assets, or which
is necessary to permit Buyer to own and operate the Acquired Companies, or ISC
to own and operate the US-Based Assets, immediately following the Closing,
including, without limitation, those consents, approvals, authorizations and
notices listed on Schedule 2.6(a) attached hereto.
---------------
(b) Parent, Seller, NMT-US, the Acquired Companies and their respective
Affiliates shall obtain the waiver, consent, authorization and approval of, and
give timely notice to, all Persons whose waiver, consent, authorization,
approval or receipt of notice (i) is required in order to consummate the
transactions contemplated by this Agreement or any Related Agreement, including,
without limitation, the sale, transfer or assignment of any of the Shares, the
Assets or the US-Based Assets or the Business which is necessary to permit Buyer
to own the Shares, and to own and operate the Business immediately following the
Closing, or (ii) is required by any Contract, Order or Permit to which Parent,
Seller, NMT-US or any Acquired Company is or will be a party or subject on the
Closing Date and (A) which would prohibit, or require the waiver, consent or
approval of, or notice to, any Person to such transactions or (B) under which,
without such waiver, consent, approval or notice, such transactions would
constitute an occurrence of default under the provisions thereof, result in the
acceleration of any obligation thereunder or give rise to a right of any party
thereto to terminate or modify its obligations thereunder, including, without
limitation, those waivers, consents, authorizations, approvals and notifications
listed on Schedule 2.6(b) attached hereto.
---------------
(c) Notwithstanding any provision in Sections 2.6(a) or 2.6(b) to the
contrary, Buyer shall not be obligated to close until Parent, Seller, NMT-US
and/or the relevant Acquired Companies have obtained each of the consents,
approvals and authorizations, and delivered each of the notices, listed on
Schedule 2.6(c) hereto (the "Critical Consents").
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3. REPRESENTATIONS AND WARRANTIES OF PARENT, SELLER AND NMT-US. Parent, Seller
-----------------------------------------------------------
and NMT-US, jointly and severally, represent and warrant to Buyer and ISC, that
the statements contained in this Article 3 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article 3), except as set forth in the disclosure
schedules delivered by Parent, Seller and NMT-US to the Buyer and ISC on the
date hereof (the "Disclosure Schedules"). Nothing in any schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein, however, unless such schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Each
reference to an Acquired Company in this Section 3 shall be deemed to mean each
Acquired Company and the Acquired Companies collectively. The Disclosure
Schedules will be arranged in numbered schedules corresponding to the section
numbers contained in this Agreement; all references to a Schedule in this
Article 3 refer to the corresponding section of the Disclosure Schedules.
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3.1 ORGANIZATION, POWER, EXECUTION.
-------------------------------
(a) Each of Parent, Seller and NMT-US is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority
(corporate and other) to own its properties, to carry on its business as now
being conducted, to execute, and deliver this Agreement and each of the
agreements, documents and instruments contemplated herein (the "Related
Agreements") to which it is a party, and to carry out the transactions
contemplated hereby and thereby. Each of Parent, Seller and NMT-US is duly
qualified to do business and in good standing in all jurisdictions in which its
ownership of property or the character of its business requires such
qualification, except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect. Certified copies of the charter and
bylaws or other governing documents of each of Parent, Seller and NMT-US, as
amended to date, are being delivered to Buyer and ISC herewith, are complete and
correct, and no amendments have been made thereto or have been authorized since
the date thereof.
(b) Each Acquired Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority (corporate and other) to
own its properties (including, without limitation, the Assets), to carry on its
business as now being conducted, to execute, and deliver this Agreement and the
Related Agreements to which it is a party, and to carry out the transactions
contemplated hereby and thereby. Each Acquired Company is duly qualified to do
business and in good standing in all jurisdictions in which its ownership of
property or the character of its business requires such qualification, except
where the failure to be so qualified or in good standing would not have a
Material Adverse Effect. Certified copies of the charter and bylaws or other
governing documents of each Acquired Company, as amended to date, are being
delivered to Buyer herewith, are complete and correct, and no amendments have
been made thereto or have been authorized since the date thereof.
(c) The execution and delivery of this Agreement and the Related
Agreements to which Parent, Seller, NMT-US and each Acquired Company is a party,
and the consummation of all transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of Parent,
Seller, NMT-US and such Acquired Company. This Agreement and each Related
Agreement to which Parent, Seller, NMT-US or any Acquired Company is a party
have been duly executed and delivered by Parent, Seller, NMT-US and/or such
Acquired Company, and constitute, and each other Related Agreement required
hereby to be executed and delivered by Parent, Seller, NMT-US or any Acquired
Company will, when delivered, constitute, the valid and legally binding
obligation of Parent, Seller, NMT-US and/or such Acquired Company, as the case
may be, enforceable in accordance with its terms, subject to bankruptcy laws and
general equitable principles.
3.2 NO VIOLATION. Except for those consents identified on Schedule
------------ --------
2.6(a) and Schedule 2.6(b), none of the execution and delivery of this Agreement
- ------ ---------------
and the Related Agreements, the consummation of the transactions provided for
herein and therein or contemplated hereby and thereby, and the fulfillment by
the Parent, Seller, NMT-US and each Acquired Company of the terms hereof or
thereof, will (with or without notice or passage of time or both) (a) conflict
with or result in a breach of any provision of the charter documents or by-laws
of the Parent, Seller, NMT-US or any Acquired Company, (b) result in a default,
give rise to
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any right of termination, non-renewal or acceleration, or require the giving of
any notice, or receipt of any consent or approval (other than approval by the
Boards of Directors of each of such party, which approvals have been obtained,
and prior to the Closing Date will not have been revoked, rescinded or
restricted) under any of the terms, conditions or provisions of any Contract,
Distribution Arrangement or other obligation to which Parent, Seller, NMT-US or
any Acquired Company is a party or by which it or any of their respective assets
may be bound, except where such default, termination, non-renewal or
acceleration, or failure to give such notice or receive such consent or approval
has not resulted and could not reasonably be expected to result in a Material
Adverse Effect; (c) violate any Law applicable to the Parent, Seller, NMT-US or
any Acquired Company, or any of their respective assets, or (d) give rise to the
imposition or creation of any Lien on any of the Shares.
3.3 CAPITALIZATION; VALIDITY OF THE SHARES.
---------------------------------------
(a) Schedule 3.3(a) sets forth the authorized capital shares of each
---------------
of the Acquired Companies and the record and beneficial owners of the issued and
outstanding shares thereof as of the date hereof and as of the Closing Date. All
of the issued and outstanding capital shares of each of the Acquired Companies
have been and are duly and validly issued and outstanding and are fully paid and
non-assessable, and are owned of record and beneficially by such Persons
identified on Schedule 3.3(a) free and clear of any and all Liens. Other than
---------------
this Agreement, there are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon Parent,
Seller, any of the Acquired Companies or any of their respective Affiliates for
the purchase or acquisition of any capital shares of any of the Acquired
Companies. All outstanding capital shares of each of the Acquired Companies were
issued in compliance with all applicable Laws. None of the Acquired Companies
has any stock appreciation rights, profit participation, phantom share plan or
similar rights outstanding with respect to its capital shares.
(b) Immediately following the Closing, the Shares will be duly and
validly issued, fully paid, non-assessable and legally and beneficially owned by
Buyer free and clear of all Liens and preemptive rights.
(c) Seller has and will at Closing have no other assets, rights or
properties other than the Shares.
3.4 AUTHORIZATIONS; COMPLIANCE.
--------------------------
(a) Each Acquired Company and, to the knowledge of Parent, Seller,
NMT-US and each of the Acquired Companies, each other relevant Person
(including, with respect to the US-Based Assets, NMT-US) has all Orders and
Permits which are required by any Governmental Authority or pursuant to any Law
to own, occupy and operate the Assets, to manufacture, distribute, market,
promote and sell the Products, and to carry on the Business as presently
conducted (collectively, the "Authorizations"), except where the failure to
possess such Authorizations has not had and could not reasonably be expected to
have a Material Adverse Effect. The Authorizations are in full force and effect,
and will be in full force and effect immediately following the Closing. All of
the Products comply, and have been manufactured,
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<PAGE>
marketed, distributed and sold in compliance with, all applicable
Authorizations, Laws, Orders and Permits, except to the extent that failure to
comply has not had or could not reasonably be expected to have a Material
Adverse Effect. None of Parent, Seller or any of the Acquired Companies has
reasonable grounds to believe that any of the Authorizations will not be renewed
or continued in the ordinary course or as a result of the transactions
contemplated hereby. The current ownership and operations of the Business and
Assets are not in violation of any applicable Authorization, Law, Order or
Permit, except to the extent that failure to comply has not had or could not
reasonably be expected to have a Material Adverse Effect.
(b) Schedule 3.4(b) sets forth a list by location of all Authorizations
in respect of any of the Products held, registered or maintained in the name of
any Person other than the Acquired Companies, including, without limitation, all
Authorizations held by distributors and resellers of the Products .
(c) To the knowledge of the Parent, Seller, NMT-US and each of the
Acquired Companies, none of the Parent, Seller, NMT-US or any of the Acquired
Companies, or any of their respective Affiliates has received notice that there
has been, or is otherwise aware of, any breach of any of the terms or conditions
of any Authorizations (or has knowledge of any threat thereof). None of the
Parent, Seller, NMT-US or any of the Acquired Companies, or any of their
respective Affiliates, has received notice requiring, or is otherwise aware of,
any requirements regarding the accumulation and submission of substantial
clinical data necessary to establish the safety and effectiveness of any Product
not previously required or imposing any other material condition or requirement
restricting the continued commercial distribution or use of such Product.
3.5 FINANCIAL STATEMENTS; NO LIABILITIES.
-------------------------------------
(a) The Reference Date Balance Sheet was prepared in accordance with
GAAP. Except as clearly indicated on the face thereof, the Reference Date
Balance Sheet reflects all assets and all Liabilities of the Business existing
as of the date thereof which are required to be reflected in financial
statements prepared in accordance with GAAP. The Reference Date Balance Sheet,
fairly presents, in all material respects, the financial condition of the
Business at the date of such Reference Date Balance Sheet. Except as reflected
in the Reference Date Balance Sheet or as disclosed in Schedule 3.5(a) and
---------------
Schedule 3.8(c), none of the Acquired Companies or NMT-US is in default with
- ---------------
respect to any material Liabilities or obligations. Any Liabilities incurred or
accrued subsequent to the date of the Reference Date Balance Sheet have been, or
are being, paid, performed and discharged in the ordinary course as they become
due, and all such Liabilities and obligations were incurred in the ordinary
course of business consistent with the Acquired Companies' and NMT-US's past
practice. All the books, records and accounts of the Acquired Companies are
accurate and complete in all material respects, are in accordance with good
business practice and all Laws applicable to the Acquired Companies and the
conduct of their respective businesses and accurately present and reflect all of
the transactions described therein. None of the Acquired Companies is engaged in
any financing (including the incurring of any borrowing or any indebtedness in
the nature of acceptances or acceptance credits) of a type which would not be
required to be shown or reflected in the Reference Date Balance Sheet.
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(b) Since the Reference Date, there has been (i) no change in the
financial condition, results of operations, assets, Liabilities or business of
the Business, which has had or could reasonably be expected to have a Material
Adverse Effect; (ii) no damage, destruction or loss (whether or not covered by
insurance) which has had or could reasonably be expected to have a Material
Adverse Effect; (iii) no labor trouble which has had or could reasonably be
expected to have a Material Adverse Effect; (iv) no sale or transfer of any
Assets, except sales in the ordinary course of business consistent with the
Acquired Companies' and NMT-US's past practice; (v) no imposition of any
material Lien, or claim upon any of the Shares or Assets and any current year
Lien with respect to personal or real property Taxes not yet due and payable and
which shall be properly accrued for on the Closing Date Balance Sheet; (vi) no
default in any Liability or obligation of any of the Acquired Companies or NMT-
US which has had or could reasonably be expected to have a Material Adverse
Effect; (vii) no agreement by any of the Acquired Companies or NMT-US to any
change in the terms of any Contract to which it is a party that has had or could
reasonably be expected to have a Material Adverse Effect; (viii) no waiver,
cancellation or disposal by any of the Acquired Companies or NMT-US of, for less
than the greater of face or fair value thereof, any claim or right which it has
against others that has had or could reasonably be expected to have a Material
Adverse Effect; (ix) no transaction or event which has increased or could
reasonably be expected to materially increase the Tax Liability of any of the
Acquired Companies or with respect to the US-Based Assets for any prior taxable
year or the Tax Liability of any of the Acquired Companies or with respect to
the US-Based Assets for any prior taxable year for which any of the Acquired
Companies, Buyer or ISC would become liable following the Closing; (x) no
transaction other than in the ordinary course of business; and (xi) no reduction
in the profits available for distribution (as defined in Section 263(3) of the
Companies Act, 1985) of any of the Acquired Companies that results in a negative
amount as of the Closing Date.
(c) None of the Acquired Companies or, with respect to the US-Based
Assets, NMT-US, has any material Liabilities, except for (i) Liabilities shown
on the Reference Date Balance Sheet, (ii) Liabilities which have arisen since
the Reference Date in the ordinary course of business consistent with past
custom and practice, and (iii) contractual and other Liabilities incurred in the
ordinary course of business which are not required by GAAP to be reflected on a
balance sheet. None of the Acquired Companies has or will have at Closing any
Liability related to the Barclays Debt.
(d) All accounts receivable of the Acquired Companies are reflected
properly on the books and records, are valid receivables subject to no setoffs
or counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the Reference Balance Sheet, as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Acquired Companies. Except as set forth on
Schedule 3.5(d)(ii), all accounts receivable listed on the Closing Date Balance
- -------------------
Sheet will be valid receivables subject to no setoffs or counterclaims, will be
current and collectible, and, except for such accounts receivable as are fully-
insured as to collectability, will be collected in accordance with their terms
at their recorded amounts, (subject only to the reserve for bad debts set forth
on the face of the Closing Date Balance Sheet) within ninety (90) days following
the date of their creation.
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3.6 ABSENCE OF CERTAIN CHANGES. Since September 30, 1999, each of the
--------------------------
Acquired Companies and, with respect to the US-Based Assets, NMT-US, has
operated its business in the ordinary course of its business and consistent with
past practice. Since September 30, 1999, except as disclosed in Schedule 3.6,
------------
(i) there have been, and as of Closing there will have been, no events, changes,
or occurrences which have had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, and (ii) none of
the Acquired Companies or NMT-US has taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if
occurring after the date of this Agreement, would represent or result in a
breach or violation of any of the covenants and agreements applicable to the
Acquired Companies and NMT-US set forth in Section 5. Without limiting the
generality of the foregoing and except as disclosed on Schedule 3.6, since
------------
September 30, 1999, none of the Acquired Companies or, as applicable and with
respect to the US-Based Assets, NMT-US, has:
(a) (i) abandoned or sold, leased, transferred or assigned any of
its assets, tangible or intangible, other than for a fair consideration in the
ordinary course of its business, consistent with past practice and which assets
do not have an aggregate book value in excess of US$50,000 (excluding sales of
inventory in the ordinary course), or (ii) mortgaged, incurred or permitted to
be attached any Liens in excess of US$50,000 on any of its assets, tangible or
intangible;
(b) entered into any Contract involving more than US$50,000 in the
aggregate, outside the ordinary course of business, consistent with past
practice, and which cannot be terminated on less than thirty (30) days notice by
such Acquired Company or NMT-US without penalty;
(c) accelerated, terminated, modified (other than modifications in
the ordinary course of business and consistent with past practice), or cancelled
any Contract (or series of related Contracts) involving more than US$50,000 in
the aggregate to which such Acquired Company or NMT-US is a party or is
otherwise bound;
(d) merged or consolidated with, or made any capital investment in,
any loan to, any advance to, or any acquisition of the securities or assets of,
any other Person (or series of related capital investments, loans, and
acquisitions);
(e) issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness or capitalized lease
obligation;
(f) issued, sold or otherwise disposed, directly or indirectly, of
any of its capital shares, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital shares;
(g) granted any license or sublicense, transferred or assigned any
right, or commenced or settled any litigation or dispute with respect to any
Intellectual Property
18
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(h) made or instituted any unusual or new methods of manufacture,
purchase, sale, distribution, shipment or delivery, lease, management,
accounting or operation, or shipped or delivered any quantity of Products in
excess of normal shipment or delivery levels;
(i) experienced any damage, destruction, or loss (whether or not covered
by insurance) to its assets or property in an aggregate amount greater than
US$50,000;
(j) made any loan to, or entered into any other transaction with, any of
its directors, officers, or employees or any of their family members, trustees
or beneficiaries;
(k) entered into any employment contract, deferred compensation agreement,
severance agreement, retirement agreement or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement;
(l) granted, provided or paid compensation or benefits to any of its
directors, officers, or employees, other than salary increases in the ordinary
course of such Acquired Company's business consistent with past practice;
(m) adopted, amended, modified, or terminated any Employee Benefit Plan,
including, without limitation, accelerating any payments due or to become due
under any deferred compensation plan;
(n) made any other change in employment terms for any of its directors,
officers or employees;
(o) made or pledged to make any charitable or other capital contribution
which is (i) not reflected on the September 30, 1999 balance sheet delivered to
Buyer's representatives or (ii) in excess of US$50,000 in the aggregate which
remains unfulfilled;
(p) made any capital expenditure or commitment for any capital expenditure
in excess of US$50,000 in the aggregate;
(q) amended its articles or memorandum/articles of incorporation/
association, by-laws or other governing instruments;
(r) made any change in any accounting methods or systems of internal
accounting controls;
(s) waived, released or compromised any right or claim in excess of
US$50,000 in the aggregate;
(t) commenced or settled any litigation or similar adversarial proceeding,
including, without limitation, any such litigation or proceeding involving the
such Acquired Company or NMT-US that, if adversely determined, could restrict
the operations of any of the Acquired Companies or the Business;
19
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(u) entered into any closing agreement or settled or agreed to settle
any claim or assessment for Taxes or surrendered any right to claim a refund of
Taxes or otherwise offset or reduce any Tax liability;
(v) made or changed any election with respect to Taxes;
(w) experienced any labor dispute, other than individual grievances, or
any lockouts, strikes, slowdowns, work stoppages by or with respect to any of
its employees; or
(x) experienced any event, occurrence, development or set of
circumstances of facts, which individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect.
3.7 TAXES.
------
(a) Parent, Seller and each of the Acquired Companies have, except as
set forth on Schedule 3.7(a), timely filed with the appropriate taxing
---------------
authorities all Returns (including, without limitation, information Returns and
other material information) in respect of Taxes with respect to the Business or
any of the Acquired Companies, required to be filed through the date hereof and
will timely file any such Returns required to be filed on or prior to the
Closing Date. The Returns and other information filed are complete, true and
accurate in all material respects. None of Parent, Seller or any of the Acquired
Companies has requested any extension of time within which to file Returns
(including, without limitation, information Returns) in respect of any Taxes.
Parent, Seller and each of the Acquired Companies have delivered to Buyer true,
complete and accurate copies of the Acquired Companies' Tax Returns (and
statements of deficiency assessed against, or agreed to by the Acquired
Companies or any other entity on behalf of the Acquired Companies) for the Tax
periods of the Acquired Companies as to which the statutes of limitations with
respect to Taxes have not expired.
(b) Except as set forth on Schedule 3.7(b), all Taxes for which the
---------------
Acquired Companies are or may be liable, in respect of periods (or portions
thereof) ending on or before the Closing Date, have been timely paid or will be
timely paid.
(c) No deficiencies for Taxes have been claimed, asserted, proposed or
assessed by any taxing or other Governmental Authority (foreign or domestic)
against any Acquired Company. There are no pending or, to the best of the
knowledge of Parent, Seller and each of the Acquired Companies, threatened
audits, investigations or claims for or relating to any Liability in respect of
Taxes, and there are no matters under discussion with any Governmental
Authorities with respect to Taxes that in the reasonable judgment of the
Acquired Companies, or their auditors or counsel, is likely to result in
additional Liability of any Acquired Company for Taxes. No extension or waiver
of a statute of limitations relating to Taxes is in effect with respect to any
Acquired Company. No power of attorney has been executed by any Acquired Company
with respect to any matter or matters relating to Taxes which are currently in
force. There is no compromise or settlement with any taxing or other
Governmental Authority that is binding any Acquired Company for any Tax period
ending after the Closing Date. There are no requests for rulings or
determinations relating to any Acquired Company pending with any taxing or other
20
<PAGE>
Governmental Authority. Except as set forth on Schedule 3.7(a), each of the Tax
---------------
Returns of the Acquired Companies for the past six (6) years have been agreed
with the Taxing Authorities and no adjustments have been made (or suggested) to
any Tax Returns of the Acquired Companies by any Governmental Authority. Set
forth on Schedule 3.7(c) for each Acquired Company are the jurisdictions in
---------------
which such Acquired Company has filed Tax Returns within the last three (3) Tax
years. No taxing authority in a jurisdiction where an Acquired Company does not
file Tax Returns has made any claim within the last three (3) years that such
Acquired Company may be subject to taxation in that jurisdiction. The Acquired
Companies have properly requested, received and retained all necessary exemption
certificates and other documentation supporting any claimed exemption or waiver
of Taxes on sales or other transactions as to which the Acquired Companies would
have been obligated to collect or withhold Taxes.
(d) There are no Liens on any of the Assets of the Acquired Companies or
on any of the US-Based Assets that arose in connection with any failure (or
alleged failure) to pay any Tax. None of the Assets of the Acquired Companies or
the US-Based Assets is property that is required to be treated for Tax purposes
as being owned by any other person.
(e) The transaction contemplated herein is not subject to the Tax
withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of Law.
(f) The provisions for Taxes shown on the Reference Date Balance Sheet
are, and the provisions for Taxes shown on the Closing Date Balance Sheet will
be, adequate to discharge all Taxes incurred by the Acquired Companies with
respect to all periods ending on or before the date thereof, including, with
respect to the Closing Date Balance Sheet, as if the taxable year of each of the
Acquired Companies ended on the Closing Date.
(g) Except as set forth on Schedule 3.7(g) hereto, none of the Acquired
--------------
Companies has, or has ever had, a permanent establishment (as defined by
applicable Tax treaty) or other taxable presence nor has been subject to Tax in
any country other than such Acquired Company's country of incorporation.
(h) None of the Acquired Companies has ever been a member of an
"affiliated group" of corporations (within the meaning of Section 1504 of the
Code), other than the group of which NMT Medical, Inc. is the common parent. No
member of any "affiliated group" of which NMT Medical, Inc. is the common parent
has any outstanding waivers or extensions of any applicable statute of
limitations relating to the assessment of Taxes. No Acquired Company has any
actual or potential Liability for any Tax obligation of any other taxpayer
(including without limitation any affiliated group of corporations or other
entities that included such Acquired Company during a prior period).
(i) None of the Acquired Companies (i) has any investment in "United
States property" within the meaning of Section 956 of the Code, (ii) is a
passive foreign investment company within the meaning of the Code or (iii) has
been engaged in a United States trade or business for federal income tax
purposes.
21
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(j) None of the Acquired Companies (i) has consented at any time under any
foreign tax provision similar to Section 341(v)(1) of the Code, to have
provisions similar to Section 341(v)(2) of the Code apply to any disposition of
the Acquired Companies' assets, or (ii) has agreed, or is required, under any
foreign tax provision similar to Section 481(a) of the Code to make any
adjustment by reason of a change in accounting method or otherwise.
(k) All material elections with respect to Taxes affecting the Acquired
Companies as of the date hereof are set forth on Schedule 3.7(k).
---------------
(l) None of the Acquired Companies is party or subject to any Tax sharing,
indemnity, allocation or similar agreements, whether or not reduced to writing.
(m) Except as set forth on Schedule 3.7(m) hereto, none of the Acquired
---------------
Companies is a party to any joint venture, partnership or other arrangement or
contract that is or could be treated as a partnership for Tax purposes.
(n) [INTENTIONALLY OMITTED]
(o) [INTENTIONALLY OMITTED]
(p) Except as set forth in Schedule 3.7(p) hereto, no Acquired Company is
------------
or has ever been a close company as defined by Section 414 of the Income and
Corporation Taxes Act, 1988 ("TA").
(q) No Acquired Company has acquired any asset other than trading stock
from any other company (other than another Acquired Company) belonging at the
time of acquisition to the same group of companies as that Acquired Company
within the meaning of Section 170 of the Taxation of Chargeable Gains Act, 1992
("TCGA") and no member of any group of companies of which any Acquired Company
is or has at any material time been the principal company (as defined in Section
170(2)(b) of the TCGA) has so acquired any asset.
(r) Schedule 3.7(r) contains particulars of all arrangements relating to
---------------
relief under Sections 402-413 of the TA ("Group Relief") to which the Acquired
Companies are or have been party and:
(i) all claims by any Acquired Company for such group relief were
when made and are now valid and have been or will be allowed by way of relief
from corporation tax;
(ii) no Acquired Company has made or is liable to make any payment
for group relief otherwise than in consideration for the surrender of Group
Relief allowable to the Acquired Company by way of relief from corporation tax;
(iii) each Acquired Company has received all payments due to it under
any arrangement or agreement for surrender of Group Relief by it for periods
prior to the Reference Date;
22
<PAGE>
(iv) no such payment exceeds or could exceed the amount permitted by
Section 402(6) of the TA;
(v) there exist or existed for any period of account in respect of which
a surrender has been made or purports to have been made no arrangements such as
are specified in Section 410(1)-(6) of the TA.
(s) Schedule 3.7(s) contains particulars of all arrangements for the
---------------
surrender under Section 240 of the TA of any amount of advance corporation tax
and in respect of receipts and surrenders disclosed:
(i) no Acquired Company has paid or is liable to pay for the benefit
of any advance corporation tax which is or may become incapable of set off
against that company's liability to corporation tax;
(ii) each Acquired Company has received all payments due to it for all
surrenders or purported surrenders of advance corporation tax made by it;
(iii) no such payment exceeds or could exceed the amount permitted by
Section 240(8) of the TA; and
(iv) there exist or existed for any period in respect of which a claim
under Section 240 of the TA has been or is to be made no arrangements such as
are specified in sub-section (11) of that section whereby any person could
obtain control of the Acquired Company or of any subsidiary to which such
surrender purports or is purported to be made.
(t) None of the activities of the Acquired Companies have created Subpart F
income, as described in Section 952(a) of the Code, from the date Parent and its
Affiliates acquired such Acquired Companies to and including the Closing Date.
(u) Schedule 3.7(u) sets forth in reasonable detail all Tax accruals of the
---------------
Acquired Companies for the 1999 Tax year (it being agreed that, notwithstanding
said schedule, for the purposes of the Reference Date Balance Sheet, the
1998/1999 Tax Make-Whole Payment and the Purchase Price Adjustment, the Tax
accrual amount shall be as stated on the Reference Date Balance Sheet).
3.8 CONTRACTS, LICENSES, ETC.
-------------------------
(a) Except as set forth in the appropriate subsection on Schedule
--------
3.8(a), or otherwise disclosed on Schedule 3.7(m), Schedule 3.8(b)(i), Schedule
- ------ --------------- ------------------ --------
3.11(c), Schedule 3.13, Schedule 3.15(a)(ii) or Schedule 3.15(b)(i), none of the
- ------- ------------- ------------------- -------------------
Acquired Companies (or, with respect to the US-Based Assets, NMT-US) is a party
to any Contract:
(i) other than the Barclays Debt, evidencing indebtedness for
borrowed money or the deferred purchase price of property, or pursuant to which
such Acquired Company has guaranteed any obligation of any other Person, except
any such Contracts with an aggregate
23
<PAGE>
outstanding principal amount not exceeding US$50,000 and which may be prepaid on
not more than thirty (30) days' notice without payment of penalty or permission;
(ii) creating or purporting to create a material Lien on any of the
Acquired Companies' properties or Assets, including the US-Based Assets;
(iii) prohibiting or limiting the ability of any Acquired Company to
engage in any line of business, to compete with any Person or to carry on its
business anywhere in the world, including, without limitation, restricting any
Acquired Company from selling, licensing or otherwise distributing any Products
to any class or type of customers or through any type of channel in any
geographic area or during any period of time;
(iv) that are confidentiality agreements, joint venture, partnership
or limited liability company agreements or similar arrangements;
(v) for the purchase or sale of materials, commodities, supplies,
products or other personal property, or for the furnishing or receipt of
services, the performance of which will extend more than one year or involve
consideration in excess of US$50,000 in the aggregate;
(vi) for the sale, transfer, lease, license or parting with
possession or ownership of any material assets of any of the Acquired Companies
on, prior to or after the date hereof (other than sales of Products by the
Acquired Companies pursuant to written orders in the ordinary course of business
and consistent with past practice);
(vii) that are license agreements pursuant to which any Acquired
Company or NMT-US is a licensee or otherwise required to pay royalties, or which
contain (A) a provision requiring such Acquired Company, NMT-US or any of their
respective Affiliates to pay royalties to the licensor without regard to whether
or not the licensed property is actually being used by Acquired Company or
Affiliate, or (B) contain any provision which restricts, prohibits or is
triggered by changes in control of the licensee;
(viii) pursuant to which any Acquired Company or NMT-US receives or is
entitled to receive royalty or similar payments;
(ix) that grants to any Person or otherwise affects any of the
Acquired Companies' or NMT-US's exclusive right to manufacture, produce,
assemble, license or market any of the Products;
(x) for the lease of personal property to or from any Person
providing for lease payments in excess of US$50,000 per annum in the aggregate;
(xi) requiring the performance of services or delivery of goods or
materials by or to any Acquired Company or NMT-US for consideration exceeding
US$50,000 in any one year that are not terminable by such Acquired Company or
NMT-US on not more than thirty (30) days' without penalty;
24
<PAGE>
(xii) for the employment or engagement of any Person on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of US$50,000 in the aggregate or which provide for the payment of
deferred compensation;
(xiii) under which it has advanced or loaned any amount to any of
its directors, officers, and employees outside the ordinary course of business,
consistent with past practice; or
(xiv) that are material to any of the Acquired Companies or
NMT-US, either individually or in the aggregate.
Parent, Seller, NMT-US and the Acquired Companies have delivered or made
available to Buyer a true, complete and correct copy of each written Contract
and a reasonably detailed written description of each oral Contract listed on
Schedule 3.8(a).
- ---------------
(b) (i) Except as set forth on Schedule 3.8(b)(i), none of the Parent,
------------------
Seller, NMT-US or any of the Acquired Companies or any of their respective
Affiliates is party or subject to any Contract, promise, arrangement,
understanding or Liability with any other Person with respect to the
distribution, sale, sale representation, brokerage, resale or consignment of
Products, whether oral, written or otherwise (the "Distribution Arrangements").
(ii) Except as disclosed on Schedule 3.8(b)(ii), each of the Distribution
------------------
Arrangements to which any Acquired Company or NMT-US is party or subject, or
which relates to any of the Products, may be terminated at any time by such
Acquired Company or NMT-US without any charge, penalty, fee or other Liability
payable by or imposed upon Buyer or any Acquired Company, or any right to
injunctive relief with respect to Buyer or any Acquired Company. (iii) The
Exclusive Distributorship Agreement, dated as of August 28, 1995, by and between
Candela Corporation and Spembly-Cryosurgery has been validly and legally
terminated in accordance with the terms thereof prior to the date hereof. Except
as set forth on Schedule 3.8(b)(iii), none of the Acquired Companies has, nor
-------------------
will the Buyer have at Closing or any time thereafter, any obligations or
liabilities in connection with said agreement or the termination thereof.
(c) Except as disclosed on Schedule 3.8(c) hereto, each of the Contracts
---------------
identified on Schedule 3.7(m), Schedule 3.8(a), Schedule 3.8(b)(i),
-------------- --------------- ------------------
Schedule 3.11(c), Schedule 3.13, Schedule 3.15(a)(ii) or Schedule
- ---------------- ------------- --------------------
3.15(b)(i) hereto:
- ----------
(i) is a valid and legally binding obligation of the Acquired
Companies and, as applicable, Parent, Seller, NMT-US and their respective
Affiliates party thereto, and, to the knowledge of Parent, Seller, NMT-US and
the Acquired Companies, each other party thereto;
(ii) will continue to be a valid and legally binding obligation
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(iii) none of Parent, Seller, NMT-US or any of the Acquired
Companies is in default under any such Contract except for such defaults which,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Material Adverse Effect;
25
<PAGE>
(iv) to the knowledge of Parent, Seller, NMT-US and the Acquired
Companies, no other Person that is a party to such Contract is in default
thereunder; and
(v) except as disclosed on Schedule 2.6(a) and Schedule 2.6(b), to
-------------- ---------------
the knowledge of Parent, Seller, NMT-US and the Acquired Companies, no event has
occurred or circumstance exists that (with or without the giving of notice, the
lapse of time or both) gives any Person other than the Acquired Company that is
a party to such Contract the right to declare a default, exercise any remedy
under, accelerate the maturity or performance of, or terminate such Contract.
(d) Except as disclosed on Schedule 3.8(d), none of the Acquired
---------------
Companies or, with respect to the US-Based Assets, NMT-US, has received any
payment from any contracting party in connection with or as an inducement for
entering into any Contract except for payment for actual services rendered or to
be rendered by the Acquired Companies or NMT-US consistent with amounts
historically charged for such services.
3.9 INTELLECTUAL PROPERTY.
----------------------
(a) Schedule 3.9(a) includes a complete and correct list and summary
---------------
description of all Intellectual Property owned by the Acquired Companies and,
with respect to the US-Based Assets, NMT-US, together with a complete list of
all material Contracts relating thereto, including without limitation all
licenses granted by or to the Acquired Companies or, with respect to the US-
Based Assets, NMT-US, with respect to any Intellectual Property. Except as
disclosed on Schedule 3.9(a), all such Intellectual Property is legally and
---------------
beneficially owned and owned of record by the Acquired Company indicated as the
owner thereof, and, with respect to the US-Based Assets, NMT-US, free and clear
of all Liens and constitutes all of such Intellectual Property necessary for the
ownership and operation of the Assets and the lawful conduct of the Business as
now conducted, except for Liens thereon that would not be reasonably likely to
have a Material Adverse Effect. Other than the tradename "NMT", neither Parent
nor any of its subsidiaries or Affiliates (including Seller and NMT-US, but
excluding the Acquired Companies) owns or licenses any Intellectual Property
used or required to be used in connection with the Business.
(b) Each of the Acquired Companies and, with respect to the US-Based
Assets, NMT-US, has such rights to use, protect, prosecute, sell, transfer,
license, sublicense, dispose of or bring actions for the infringement of its
rights in and to, and to exclude others from using, the Intellectual Property
required to be listed on Schedule 3.9(a) as are established by the applicable
--------------
Laws of each relevant jurisdiction (and to the extent provided in each agreement
under which each Acquired Company or NMT-US is licensee) and granted to the sole
and exclusive owner of an item of Intellectual Property of such kind. Except as
disclosed on Schedule 3.9(b), each Acquired Company and, with respect to the US-
---------------
Based Assets, NMT-US, is the sole beneficial and record owner of its
Intellectual Property. The Intellectual Property required to be listed on
Schedule 3.9(a) which is registered or the subject of an application for
registration (collectively, the "Registered Intellectual Property") has been
duly maintained in accordance with the legal and administrative requirements of
the appropriate jurisdictions in all material respects, and has (except for
patents which may have expired on their normal expiration dates)
26
<PAGE>
not lapsed, expired, been canceled or been abandoned. No registration or
application for registration of any item of Registered Intellectual Property is
the subject of any pending opposition, challenge, interference, cancellation or
other legal or governmental proceeding filed before any Governmental Authority.
(c) Except as disclosed on Schedule 3.9(c), none of the Acquired
---------------
Companies or, with respect to the US-Based Assets, NMT-US has received notice of
any violation of and, to the knowledge of Parent, Seller, NMT-US and the
Acquired Companies, (i) none of Acquired Companies (and none of their employees
or agents) is infringing, misappropriating, misusing or violating, the rights of
others in any Intellectual Property, and (ii) neither the Business nor any
Acquired Company is subject to any claim to pay compensation pursuant to
Sections 40 and 41 of the Patents Act 1977, and there are no facts or
circumstances likely to give rise to such a claim.
(d) To the knowledge of Parent, Seller, NMT-US and the Acquired
Companies, there has been no infringement, unauthorized use, breach of
confidentiality obligations, disclosure or misappropriation by any Person of any
Intellectual Property required to be listed on Schedule 3.9(a).
---------------
(e) Each of the Acquired Companies has reviewed its operations with a
view towards assessing whether the Assets, Products and Business are Year 2000
Compliant. Schedule 3.9(e) contains a true, correct and complete list of all
written or oral studies, audits, surveys, reports and investigations conducted
by or on behalf of the Acquired Companies with respect to the foregoing. All
computer software used in the Business is Year 2000 Compliant, it being agreed
that no representations or warranties are being made with respect to the
Chameleon financial and accounting software system. For purposes of this
Agreement, "Year 2000 Compliant" with the foregoing shall mean that all such
equipment and software has and will continue to, (i) function on and after
January 1, 2000 and (ii) process, store and otherwise handle data containing or
depending upon dates, on and after January 1, 2000, including leap year
calculations.
(f) Parent, Seller, NMT-US and each of the Acquired Companies and their
respective Affiliates have taken reasonable security measures to safeguard and
maintain their respective property rights in all Intellectual Property owned by
the Acquired Companies and, with respect to the US-Based Assets, NMT-US. All
officers, employees and consultants of the Acquired Companies or, with respect
to the US-Based Assets, NMT-US, who have access to proprietary information have
executed and delivered to the applicable Acquired Company(ies) or NMT-US an
agreement regarding the protection of proprietary information, and the
assignment to or ownership by the Acquired Companies of all Intellectual
Property arising from the services performed for the Acquired Companies by such
Persons. To the knowledge of the Parent, Seller, NMT-US and the Acquired
Companies, no current or prior officers, employees or consultants of the Parent,
Seller, NMT-US or any of the Acquired Companies claim, and the none of such
parties is aware of any grounds to assert a claim to, any ownership interest in
any Intellectual Property of the Acquired Companies or, with respect to the US-
Based Assets, NMT-US as a result of having been involved in the development of
such property while employed by or consulting to the Acquired Companies, NMT-US
or otherwise.
27
<PAGE>
(g) None of Parent, Seller, NMT-US or any of the Acquired
Companies or their respective Affiliates (i) have sold, transferred, licensed or
otherwise granted the right to any Person to use the name "Neurosciences" (or
any word substantially similar thereto), whether alone or in combination with
any other text or graphics, or (ii) except as set forth on Schedule 3.9(g)
hereto, have registered, filed any application in respect of or otherwise sought
ownership or rights in and to the name "Integra" (or any word substantially
similar thereto), whether alone or in combination with any other text or
graphics.
3.10 LABOR MATTERS.
--------------
(a) Within the last three (3) years none of the Acquired
Companies has been the subject of any trade dispute as defined in Section 218 of
the UK Trade Union Labour Relations (Consolidation) Act 1992 ("TULRC"), nor has
there been any strike, work stoppage or slow-down of any kind called or
threatened to be called against any of them, and no event has occurred which
could or might give rise to such dispute or action. None of the Acquired
Companies has committed a violation of any applicable Law relating to trade or
trade practices, which violation has had or could reasonably be expected to have
a Material Adverse Effect.
(b) Except as specified in Schedule 3.10(b), there are no
Contracts, including recognition agreements and collective agreements, between
any of the Acquired Companies and any trade union, workers' council or other
body representing employees.
(c) Except as set forth on Schedule 3.10(c), no supervisory
employee of any of the Acquired Companies has given or received notice
terminating his or her employment or office, and no such supervisory employee
will be entitled to give such notice as a result of this Agreement or any of the
Related Agreements.
(d) To the knowledge of Parent, Seller and the Acquired
Companies, there are no current investigations by any Governmental Authority in
relation to any employment practice in the Acquired Companies.
(e) Except as set forth on Schedule 3.10(e) hereto, there are no
notices, consents, authorizations or approvals, or payments or indemnifications,
in respect of any employee of the Business which would be required in the event
that any of the Acquired Companies ceased operations and terminated its
workforce.
(f) No Acquired Company has entered into any agreement and no
event has occurred which may involve an Acquired Company in the future acquiring
any undertaking or part of one such that the United Kingdom Transfer of
Undertakings (Protection of Employment) Regulations 1981 (as amended) may apply
thereto.
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3.11 EMPLOYEE BENEFIT PLANS
----------------------
(a) All Employee Benefit Plans have been maintained in compliance
with the requirements of all applicable Laws and any rules, policies and
procedures thereof.
(b) None of the Acquired Companies maintains, contributes to, or is
obligated to contribute to any "multiemployer plan," as defined in Section 3(37)
of Employee Retirement Income Security Act of 1974 (as amended).
(c) Schedule 3.11(c) hereto contains a complete and correct list
----------------
of all Employee Benefits Plans currently maintained or contributed to by the
Acquired Companies with respect to any employee or former employee of the
Acquired Companies.
(d) No action, investigation or audit (other than routine claims
for benefits) is pending or threatened against any Employee Benefit Plan of any
of the Acquired Companies.
(e) The Reference Date Balance Sheet reflects, and the Closing Date
Balance Sheet will reflect, an accrual for any unpaid Liabilities relating to
Employee Benefit Plans which are required to be accrued by GAAP.
(f) No amounts will be paid or become payable, or benefits or
vesting of benefits accelerated under, any Employee Benefit Plan of any Seller
as a result of the transactions provided for in this Agreement.
(g) Schedule 3.11(g) hereto contains a current list of all
----------------
employees of the Acquired Companies and their current employer, compensation
(including salary, bonus and other benefit schemes, arrangements and
understandings), title, job function and length of employment. Copies of all
other standard terms and conditions, staff handbooks and policies have
previously been provided to Buyer.
(h) Schedule 3.11(h) hereto contains a list of all current
----------------
employees of the Acquired Companies who shall cease to be employees of the
Acquired Companies effective upon the Closing (collectively, the "Excluded
Employees"), and all accrued vacation, pension, benefit and similar Liabilities
of the Acquired Companies in respect thereof.
(i) No power under the Pension Scheme to augment benefits or to
provide benefits which would not otherwise have been provided has been exercised
since the date of its last actuarial valuation.
(j) Only employees of the Acquired Companies have participated in
the Pension Scheme.
(k) All lump sum death-in-service benefits (other than a refund of
the member's contributions with interest where appropriate) payable under the
Pension Scheme on death before normal pension age of a member while in an
employment to which the Pension Scheme relates are insured fully under a policy
with an insurance company of good repute.
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(l) All contributions to the Pension Scheme have at all times been
made in accordance with the provisions of the Pension Scheme and the
recommendations of the actuary to the Pension Scheme. The assets of the Pension
Scheme will not be less than the greater of the Projected Benefit Obligation
under US GAAP or the UK Minimum Funding Standard as of the Closing Date.
(m) Except as set forth in Schedule 3.11(m) hereto, there has been
----------------
no increase or decrease in the rate of any contribution to the Pension Scheme by
any Seller at any time in the three (3) years ending on the date of this
Agreement and no such increase or decrease has been agreed to, or, on the basis
of actuarial advice received in respect of the Pension Scheme, proposed or
advised.
(n) All life insurance and long term disability benefits under the
Pension Scheme are fully insured outside of the Pension Scheme.
(o) There are no material actions, suits or claims pending or
threatened (other than routine claims for benefits) in respect of the Pension
Scheme or the benefits thereunder.
(p) No "surplus payment" within the meaning of the Pension Scheme
Surpluses (Administration) Regulations 1987 (S.I. 1987 No. 352) has been made
out of the Pension Scheme.
3.12 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Except as set forth in
----------------------------------------
Schedule 3.12 hereto:
- -------------
(a) The Acquired Companies and, with respect to the US-Based
Assets, NMT-US, are and have at all times been in compliance with all applicable
Environmental Laws in connection with the leasing, ownership, manufacture,
operation and condition of the Real Property, the Assets and the Business. There
are no past or pending violations or alleged violations by any of the Acquired
Companies or, with respect to the US-Based Assets, NMT-US, of any Environmental
Laws asserted by any Governmental Authority or third party. Set forth in
Schedule 3.12(a) hereto are all Orders, Permits and other approvals necessary to
- ----------------
conduct the Business or operate at the Real Property in compliance with
Environmental Laws.
(b) There is no past or ongoing Release of Hazardous Materials
whether or not caused by the Acquired Companies into the environment on, from or
within any real property owned, leased, or utilized at any time by the Business.
No Release of Hazardous Materials into the environment has caused or aggravated
any condition or damage which would necessitate response, removal, or other
remedial action or otherwise restrict the use or occupation of any property
whether under Environmental Laws or otherwise after the date of this Agreement
with respect to any property, regardless of whether the property is owned,
leased or otherwise utilized by the Acquired Companies. All environmental
assessments, reports and investigations with respect to any property currently
or previously owned, leased, or utilized by the Business, whether commissioned
by the Acquired Companies or third parties, are identified on Schedule 3.12(b)
----------------
and have been made available to Buyer prior to the date hereof.
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(c) Except as disclosed on Schedule 3.12(c) hereto, (i) there are
----------------
no Hazardous Materials located on, contained in, or otherwise part of any
property utilized by the Business, (ii) none of the Acquired Companies or, with
respect to the US-Based Assets, NMT-US, has arranged for the transportation,
storage, treatment or disposal of any Hazardous Materials at any property or
site not owned or controlled by the Business or has otherwise owned or operated
at any property that has or could reasonably be expected to give rise to any
Liability of the Acquired Companies or, after the date hereof, Buyer or ISC,
under any Environmental Law, and (iii) none of Parent, Seller, NMT-US, the
Acquired Companies or any of their respective Affiliates, employees, agents or
representatives has received any notice or is aware of any requirement under any
Environmental Law regarding the removal, containment, treatment or other action
in respect of asbestos located in or on any real or personal property,
including, without limitation, the Real Property and Improvements utilized in
the Business.
(d) Except as disclosed on Schedule 3.12(d), there are no
landfills, lagoons, impoundments, waste piles, drum storage areas, or storage
tanks (above or underground) on any property previously or currently owned,
leased, or utilized by the Business.
3.13 INSURANCE. All policies and binders of insurance for product
---------
liability, directors and officers, fire, liability, property workers'
compensation and other customary matters held by or on behalf of, or which
provide coverage for, the Acquired Companies or, with respect to the US-Based
Assets, NMT-US, (the "Insurance Policies") are identified on Schedule 3.13(i)
----------------
hereto and have been made available to Buyer. The Insurance Policies are in full
force and effect and none of the Acquired Companies, NMT-US or any other Person
is in default with respect to any material provision contained in any Insurance
Policy nor have any of the Acquired Companies, NMT-US or any other Person failed
to give any notice of any material claim under any Insurance Policy in due
timely fashion, nor has any coverage for current claims been denied. Since July
8, 1998, there has been no material adverse change in Parent's, Seller's, NMT-
US's or any Acquired Company's relationship with its insurers or in premiums
payable. Schedule 3.13(ii) contains a list of pending insurance claims relating
-----------------
to the Business, the Assets and the Products, and a history of insurance
claims/loss run relating to the Business and the Assets for the five (5) years
preceding the date of this Agreement.
3.14 RELATED PARTY RELATIONSHIPS. None of the Acquired Companies is,
---------------------------
or at Closing will be, indebted, directly or indirectly, or committed to make
loans or extend credit, to any current or former officer or director (or any
members of their immediate families) of any of the Acquired Companies, Parent,
Seller, NMT-US or any of their respective Affiliates, in any amount whatsoever
other than in connection with expenses or advances of expenses incurred in the
ordinary course of the Business. No officer or director (or any members of their
immediate families) of any of the Acquired Companies, Parent, Seller, NMT-US or
any of their respective Affiliates or is, directly or indirectly, indebted to
the Acquired Companies or has any direct or indirect ownership interest in any
firm or entity with which the Acquired Companies is affiliated or with which any
of the Acquired Companies has a business relationship, or any firm or entity
which competes with any of the Acquired Companies. No officer or director (or
any members of their immediate families) of any of the Acquired Companies,
Parent, Seller, NMT-US or any of their respective Affiliates has, directly or
indirectly, a financial interest in any Contract with any of the
31
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Acquired Companies. None of the Acquired Companies is a guarantor or indemnitor
of any indebtedness of any other Person.
3.15 OWNERSHIP OF TANGIBLE ASSETS AND LEASES.
----------------------------------------
(a) With respect to the Assets other than the Real Property and
Improvements:
(i) Except as disclosed on Schedule 3.15(a)(i) hereto (with
-------------------
respect to leased Assets), the Acquired Companies have or will have at Closing
good, valid and marketable title to all of the Assets (other than the US-Based
Assets) free and clear of any Liens; provided, however, that to the extent that
any Assets (other than the US-Based Assets) are owned by Parent, Seller or any
of their respective Affiliates (other than the Acquired Companies), such Assets
shall be transferred to the Acquired Companies prior to the Closing.
(ii) Schedule 3.15(a)(ii) hereto describes each of the Assets
--------------------
which has a value in excess of US$50,000 which is held under any lease or
conditional sale or other title retention agreement and lists the related
leases, conditional sale agreements or other title retention agreements.
(iii) None of the Acquired Companies has received any payment
from a lessor in connection with or as inducement for entering into any such
lease except as set forth on Schedule 3.15(a)(iii). Any security deposits made
---------------------
under the leases and agreements relating to the Assets described on Schedule
--------
3.15(a)(ii) are set forth on such Schedule.
- -----------
(iv) None of the Assets are leased by any of the Acquired
Companies or NMT-US to any other person or entity.
(v) The property and Assets (including Intellectual
Property) owned, leased or licensed by the Acquired Companies, or which they
otherwise have a right to use, together with all Contracts to which they are a
party, consist only of properties, assets, rights and Contracts relating to the
Business and such property, Assets (including Intellectual Property), rights and
Contracts are adequate to conduct the Business as currently conducted and
proposed to be conducted.
(vi) All machinery, equipment and tools used in the Business
are usable and operable in good working order and condition, and are in a
reasonable state of repair, subject only to ordinary wear and tear, and have
been subject to regular maintenance, except where the failure to be in such
state or condition has not had and could not reasonably be expected to have a
Material Adverse Effect.
(vii) Except pursuant to this Agreement, none of the Acquired
Companies or NMT-US is a party to any Contract whereby there has been granted to
anyone an absolute or contingent right to purchase, obtain or acquire any rights
in any of the Assets.
(viii) All of the Assets are, or will at Closing, be located at
the Andover Facility or at such other locations as contemplated by Section
5.8(a).
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<PAGE>
(ix) NMT-US has, and will transfer to ISC at Closing, good, valid
and marketable title to all of the US-Based Assets free and clear of any Liens.
(b) With respect to the Real Property and Improvements:
(i) Schedule 3.15(b)(i) hereto describes all real property
-------------------
leased for use in the Business and lists the related leases. The leases
described in Schedule 3.15(b)(i) hereto are in full force and effect and
-------------------
constitute valid and legally binding obligations of the applicable Acquired
Companies and the other respective parties thereto and are enforceable in
accordance with their terms, subject to bankruptcy laws and general equitable
principles. There are no material defaults of any Acquired Company or, to the
knowledge of Parent, Seller or any of the Acquired Companies, any third party
under any such leases (nor are there any events or conditions which, with notice
or lapse of time, or both, would constitute a material default).
(ii) None of the property, nor any part thereof, described in
Schedule 3.15(b)(i) is leased by any of the Acquired Companies to any other
- -------------------
person or entity.
(iii) No consent of any landlord, property agent, manager or any
other Person is required under any of the leases listed on Schedule 3.15(b)(i)
-------------------
is required in connection with the transactions contemplated hereby.
(iv) No Taxes, rates, assessments, water charges or sewer charges
relating to the Real Property or the Improvements are in arrears and there are
no special Taxes, assessments or charges pending or, to the knowledge of the
Parent, Seller or any of the Acquired Companies, threatened, against the Real
Property or the Improvements.
(v) The Real Property and the Improvements are usable and
operable in the Business as presently conducted, the Improvements are in good
working order and condition, and in a reasonable state of repair, subject only
to ordinary wear and tear, and, since July 8, 1998, have been subject to regular
maintenance.
(vi) There are no pending, and none of Parent, Seller or any of
the Acquired Companies has received any written notice of, nor do any of Parent,
Seller of any of the Acquired Companies have any knowledge of, any threatened or
contemplated court or arbitration proceedings affecting the Real Property, the
Improvements or any part thereof.
(vii) None of the Acquired Companies is or has been in occupation
of or entitled to any estate or interest in land or premises except for the Real
Property.
(viii) Except for the deposit of the title deeds of the Real
Property, such property and its title deeds are free from any Lien or other
third party right whether in the nature of security or otherwise. All
assignments through the date of closing with respect to each of the leases
listed on Schedule 3.15(b)(i) have been properly and legally made and, as
-------------------
necessary, consented to by the appropriate parties, and are valid and
enforceable.
(ix) The Acquired Companies have performed and observed all
covenants affecting or relating to the Real Property (or the use or occupancy
thereof) requiring
33
<PAGE>
observance or performance by it, except for such failure to observe or perform
such covenants as has not had or could reasonably be expected to have a Material
Adverse Effect, and none of Parent, Seller or any of the Acquired Companies has
received any notice of, nor is aware of, any breach of any such covenants.
(x) Except as set forth on Schedule 3.15(b)(x), all
-------------------
manufacturing, distribution and related operations of the Business are carried
out at the Andover Facility. Except for the operations of the Business, no
business or operations of Parent or any Affiliate of Parent (other than the
Acquired Companies) are conducted at the Andover Facility.
(xi) The Acquired Companies have no Liabilities (in any capacity
including as principal contracting party or guarantor) in relation to any lease,
license or other interest in, or agreement relating to, land apart from the Real
Property.
(xii) All disclosure and replies to inquiries related to the Real
Property made or given by or on behalf of Seller or the Acquired Companies to
the Buyer or its counsel are complete and accurate and do not omit or fail to
state any material information so requested.
3.16 BROKERS-SELLERS. None of the Parent, Seller, NMT-US or any of the
---------------
Acquired Companies or any of their respective Affiliates have engaged any person
or entity which has or could have any valid claim against Buyer, ISC or any of
the Acquired Companies for a finder's fee, brokerage commission or other similar
payment nor otherwise acted in such a manner as to give rise to any valid claim
against Buyer, ISC or any of the Acquired Companies for a finder's fee,
brokerage commission or other similar payment.
3.17 LITIGATION. There is no suit, action, proceeding, claim or
----------
investigation pending or, to the knowledge of Parent, Seller, NMT-US or any of
the Acquired Companies, threatened, against NMT-US (with respect to the US-Based
Assets) or any of the Acquired Companies relating to any of the Business or any
of the Products or Assets, including, without limitation, claims for breach of
product warranties, product liability claims and claims covered by any of the
Insurance Policies. During the five (5) years preceding the date of this
Agreement, there have been no product liability claims asserted in writing
against any of the Acquired Companies or any of their Affiliates or
predecessors-in-interest with respect to any of the Products, except as
disclosed on Schedule 3.17 hereto.
-------------
3.18 PRODUCT WARRANTY AND PRODUCT LIABILITY CLAIMS. No Product
---------------------------------------------
manufactured, sold, distributed or delivered by or on behalf of any Acquired
Company or NMT-US is subject to any warranty, guaranty, right of return or other
indemnity other than the relevant Acquired Company's applicable standard terms
and conditions of sale, which are consistent with customary industry practice.
The Parent has maintained product liability insurance coverage covering the
Acquired Companies, NMT-US and the Products in amounts of not less than
US$1,000,000 per occurrence and US$10,000,000 in the aggregate with respect to
products manufactured, sold, distributed or delivered by the Acquired Companies
and NMT-US. Such product liability insurance is on a claims made basis. With
respect to Liabilities related to actual or potential warranty claims, the
Acquired Companies have established an adequate reserve therefor in conformity
with GAAP and the Acquired Companies' past custom and practice. The
34
<PAGE>
Acquired Companies do not have nor will they have any Liability for warranty
claims in excess of the reserve so established with respect to any Products sold
prior to the Closing Date, provided that the Acquired Companies continue to
perform warranty repair work in a manner consistent with their past practice.
3.19 ENTERPRISE RESOURCE PLANNING SOFTWARE. None of the Acquired Companies
-------------------------------------
has any Liabilities or has made any payments with respect to the Movex system.
The Movex system is currently sufficient for all of the Acquired Companies'
material financial and accounting software needs and will be sufficient until
such time as the Acquired Companies have reinstalled an operating and fully-
functional Chameleon system. Following reinstallation of the Chameleon system
and the transfer of data related to the Acquired Companies and the Products from
the Movex system to the Chameleon system, all Confidential Information will be
stored in, contained on or accessible only through or by such systems, software
or hardware owned by the Acquired Companies and located solely at the Andover
Facility.
3.20 ELEKTA AGREEMENT. Other than as set forth on Schedule 3.20 hereto,
----------------
none of the Acquired Companies or, with respect to the US-Based Assets, NMT-US,
has any Liability to, or claims for indemnification against, Elekta pursuant to
that certain Purchase Agreement, dated as of May 8, 1998 (as amended, the
"Elekta Agreement"), between Elekta. None of Parent, Seller, NMT-US or any of
the Acquired Companies is aware of any fact, condition or circumstance which
gives, or could reasonably be expected to give, rise to any Liability of any of
the Acquired Companies or, with respect to the US-Based Assets, NMT-US, to
Elekta, pursuant to the Elekta Agreement or otherwise. Except as disclosed on
Schedule 3.20, none of the Acquired Companies or, with respect to the US-Based
Assets, NMT-US, is currently obtaining any service or product from, or is
otherwise required to make payments to, Elekta or any of its Affiliates.
3.21 INVENTORY. All inventory reflected on the Reference Date Balance
---------
Sheet and all other inventory acquired by the Acquired Companies since December
31, 1999, was acquired in the ordinary course of business and in a manner
consistent with the Acquired Companies' and NMT-US's regular inventory
practices. Except for demonstration inventory, all such inventory is in good and
saleable condition, other than products in the development phase which have not
been completed for offer or sale to customers. Except as set forth on Schedule
3.21, none of the Acquired Companies' or, with respect to the US-Based Assets,
NMT-US's inventory is held by any Person (including any of their Affiliates) on
consignment or is located outside of the Andover Facility or NMT-US's facility
in Atlanta, Georgia. In the aggregate, adequate reserves have been established
on the Reference Date Balance Sheet and on the Acquired Companies books of
account with respect to excessive and obsolete inventory (it being agreed that
for the purposes of this Section 3.21, the term "excessive and obsolete
inventory" shall refer to any on-hand raw materials, parts, supplies, or
finished Products which (a) cannot be sold at current prices in the ordinary
course of business, (b) which are not usable in the production of current
Products, or (c) which consist of on-hand quantities in excess of one year's
historical usage).
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3.22 CERTIFICATIONS; PRODUCT SAFETY
------------------------------
(a) Except as set forth on Schedule 3.22(a), (i) all operations of
----------------
the Business have achieved and maintained the ISO 9001 certification and are
compliant with United States Food and Drug Administration Quality System
Regulations in all material respects, and (ii) there is no pending and none of
Parent, Seller or any of the Acquired Companies has received any notice of, nor
is aware of, any threatened, action to audit, repeal, fail to renew or challenge
any of such certifications.
(b) Except as set forth on Schedule 3.22(b), none of Parent, Seller,
----------------
NMT-US, any Acquired Company or any of their respective Affiliates has been
required to file any notification or other report with or provide information to
any product safety agency, commission, board or other Governmental Authority of
any jurisdiction concerning actual or potential hazards with respect to any
Product manufactured, distributed, sold or leased or service rendered by any
Acquired Company or any employee or agent thereof. Each Product manufactured,
sold or leased, or service rendered by the Acquired Companies complies in all
material respects with all product safety standards of each applicable product
safety agency, commission, board or other Governmental Authority.
3.23 CUSTOMERS, SUPPLIERS AND LICENSORS. None of Parent, Seller, NMT-US,
----------------------------------
any of the Acquired Companies or any of their respective Affiliates has received
written notice of or has knowledge that any customers or distributors of, or
suppliers or licensors to the Business or any Product has taken any action (or
intends or could reasonably be expected to take any action as a result of the
transactions contemplated hereby), which could materially adversely affect the
business relationship of any of the Acquired Companies with such customer,
distributor, supplier or licensor.
3.24 EXPORT. Except as set forth on Schedule 3.24, none of Parent,
------
Seller, NMT-US or any of the Acquired Companies has sold at any time since July
8, 1998, or to the knowledge of Parent, Seller, NMT-US and the Acquired
Companies, at any time prior thereto, directly or indirectly through any
Affiliate, or to its knowledge, through a distributor or other Person, any
Products in or to any of the following countries (or to any Person acting on
behalf of any of the following countries): Burma (Myanmar), Cuba, Libya, Iran,
Iraq, North Korea, Sudan, Syria, Yugoslavia, or the Taliban in Afghanistan or
UNITA in Angola.
3.25 [INTENTIONALLY OMITTED]
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND ISC. Buyer and ISC, jointly
-----------------------------------------------
and severally, represent and warrant to Parent, Seller, NMT-US, as of the date
hereof and as of the Closing Date, as follows:
4.1 ORGANIZATION, POWER, EXECUTION
------------------------------
(a) Each of Buyer and ISC is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority (corporate and other) to
own its properties, to carry on its business as now being conducted, to execute,
and deliver this Agreement and each of the Related Agreements to which it is a
party, and to carry out the transactions contemplated hereby and thereby.
36
<PAGE>
(b) The execution and delivery of this Agreement and the Related
Agreements to which Buyer or ISC is a party, and the consummation of all
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Buyer and ISC. This Agreement and each
Related Agreement to which Buyer or ISC is a party have been duly executed and
delivered by Buyer and ISC, and constitute, and each other Related Agreement
required hereby to be executed and delivered by Buyer or ISC will, when
delivered, constitute, the valid and legally binding obligation of Buyer or ISC,
as applicable, enforceable in accordance with its terms, subject to bankruptcy
laws and general equitable principles.
4.2 NO VIOLATION. Except for those consents identified on Schedule
------------ --------
2.6(a), Schedule 2.6(b) or Schedule 4.2, none of the execution and delivery of
- ------ -------------- ------------
this Agreement and the Related Agreements, the consummation of the transactions
provided for herein and therein or contemplated hereby and thereby, and the
fulfillment by Buyer and ISC of the terms hereof or thereof, will (with or
without notice or passage of time or both) (a) conflict with or result in a
breach of any provision of the charter documents or by-laws of Buyer or ISC, (b)
result in a default, give rise to any right of termination, cancellation or
acceleration, or require any consent or approval (other than approval by the
Boards of Directors of Buyer and ISC, which approvals have been obtained, and
prior to the Closing Date will not be revoked, rescinded or restricted) under
any of the terms, conditions or provisions of any Contract or obligation to
which either of Buyer or ISC is a party or by which it or any of its assets may
be bound, or (c) violate any Law applicable to Buyer, ISC or any of their
respective assets.
4.3 BROKERS-BUYER AND ISC. Neither Buyer nor ISC has engaged any person
---------------------
who could have any valid claim against any Parent, Seller or NMT-US for a
finder's fee, brokerage commission or other similar payment.
5. COVENANTS. Parent, Seller, NMT-US and each of the Acquired Companies,
---------
jointly and severally, covenant and agree, on their respective behalf, as
follows:
5.1 CONDUCT OF THE BUSINESS. From the date hereof through the Closing
-----------------------
Date, except as otherwise permitted by this Agreement or unless the prior
written consent of Buyer is obtained (such consent not to be unreasonably
withheld or delayed), each Acquired Company and, with respect to the US-Based
Assets, NMT-US shall, and Parent and Seller shall cause each Acquired Company
and NMT-US to: (a) carry on the Business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and use its best
efforts to maintain the present business organization and goodwill, keep
available the services of present employees, and preserve relationships with
customers, suppliers, distributors and others having dealings with the Business,
(b) pay all bonuses and other compensation due to the employees of the Acquired
Companies for all periods prior to the Closing, and (c) refrain from taking any
action which would (i) adversely affect the ability of any party to obtain any
consents required for the transactions contemplated hereby, (ii) adversely
affect the ability of any party to perform its covenants and agreements under
this Agreement or any Related Agreement, or (iii) constitute a breach of and
representation or warranty contained in, or require additional disclosure under,
Section 3.6, clauses (a) through (x), inclusive. Notwithstanding any provision
herein to the contrary, Parent, Seller, NMT-US and the Acquired Companies agree
that Buyer shall be entitled to receive full information regarding any pending
material Contract negotiations and shall have the
37
<PAGE>
right to advise and approve any and all such Contracts to be entered into by any
of the Acquired Companies that will continue in effect following the Closing,
including, without limitation, any agreements or arrangements with Dantec
Measurement Technology Ltd. or Gyrus Medical Ltd.
5.2 CERTAIN CHANGES. Between the date hereof and the Closing Date,
----------------
except as otherwise specifically permitted by this Agreement or unless the prior
written consent of Buyer is obtained (such consent not to be unreasonably
withheld or delayed), none of Parent, Seller, NMT-US or any Acquired Company
shall permit (a) the imposition or attachment of any Lien on any of the Assets,
other than inchoate liens incurred in the ordinary course of business which
would not have a Material Adverse Effect, individually or in the aggregate, (b)
the sale, assignment, transfer, abandonment or other disposition of any of the
Assets, or any interest therein, other than sales of Products in the ordinary
course of the Business, (c) the sale, merger or consolidation of any of the
Acquired Companies or any equity interests therein to or with any Person, (d)
the modification, amendment, alteration, waiver or termination of any of the
Contracts required to be disclosed on Schedule 3.7(m), Schedule 3.8(a), Schedule
3.8(b)(i), Schedule 3.11(c), Schedule 3.13(ii), Schedule 3.15(a)(ii) or Schedule
3.15(b)(i) hereto or of any right or interest of any Acquired Company or NMT-US
thereunder, (e) the declaration or payment of any dividends or other
distributions to an equityholder by any of the Acquired Companies (except for
the dividend (the "Pre-Closing Dividend") to be made by each of the Acquired
Companies in an amount equal to the lesser of (i) the maximum amount of a
dividend that may be legally declared and paid in accordance with the
requirements and limitations of the Companies Act, 1985, and (ii) the amount of
the Intergroup Receivable (after giving effect to the adjustments under Section
2.4 above) of such Acquired Company from Affiliates of Parent (other than
another Acquired Company)) or the purchase or redemption of any of their capital
shares; or (f) any of the Acquired Companies to (i) take any action to amend its
charter or bylaws or other governing documents; (ii) issue any stock, bonds,
shares of its capital or other securities, or grant any option or issue any
warrant to purchase or subscribe for any of such securities or issue any
securities convertible into or exchangeable for such securities; (iii) incur any
obligation or Liability (absolute or contingent), except current Liabilities
incurred and obligations under Contracts entered into in the ordinary course of
the Business consistent with the Acquired Companies' past practice; (iv) cancel
any debts or claims, except in the ordinary course of the Business consistent
with the Acquired Companies' past practice; (v) make, accrue or become liable
for any bonus, profit sharing or incentive payment, except for accruals under
existing Employee Benefit Plans, if any, or increase the rate of compensation
payable or to become payable by it to any of its officers, directors or
employees, other than increases in the ordinary course of the Business
consistent with past practice; (vi) make any election or give any consent under
the Code or the Tax Laws of any jurisdiction or make any termination, revocation
or cancellation of any such election or any consent or compromise or settle any
claim for past or present Tax due; (vii) waive or relinquish any rights of
material value; (viii) make or permit any act or omission constituting a breach
or default under any contract, indenture or agreement by which it or its
properties are bound; (ix) enter into any Contracts other than those entered
into in the ordinary course of business calling for payments which in the
aggregate do not exceed US$50,000 for each such lease, contract, agreement or
understanding; (x) engage any employee for a salary in excess of US$75,000 per
annum; (xi) alter the terms, status or funding condition of any employee benefit
plan; or (xii) commit or agree to do any of the foregoing in the future.
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5.3 ACCESS TO INFORMATION.
---------------------
(a) From the date hereof until the Closing Date, upon reasonable
notice, Parent, Seller, NMT-US and each of the Acquired Companies shall, and
shall cause each of their respective officers, directors, employees, agents,
representatives, accountants and counsel to: (i) afford the officers, employees
and authorized agents, accountants, counsel and representatives of the Buyer
reasonable access, during normal business hours and without unreasonable
interference with business operations, to the offices, properties, plants, other
facilities, books and records of the Acquired Companies or NMT-US (with respect
to the US-Based Assets), or otherwise related to the Business, and to those
officers, directors, employees, agents, accountants, counsel, customers and
suppliers of the Acquired Companies who have any knowledge relating to the
Assets or the Business, (ii) furnish to the officers, employees and authorized
agents, accountants, counsel and representatives of the Buyer such additional
financial and operating data and other information regarding the Assets,
properties and goodwill of the Acquired Companies, NMT-US and the Business (or
legible copies thereof) as the Buyer may from time to time reasonably request,
and (iii) provide Buyer with (A) all forms, certificates and/or other
instruments required to pay the transfer and recording Taxes and charges arising
from the transactions contemplated by this Agreement and any Related Agreement,
together with evidence satisfactory to Buyer that such transfer Taxes and
charges have been paid by the Parent and/or Seller, (B) a clearance certificate
or similar document(s) which may be required by any Taxing authority to relieve
Buyer of any obligation to withhold any portion of the payments to Parent and/or
Seller pursuant to this Agreement or any Related Agreement and (C) all filings,
rulings, clearances, interest clearance requests, Group Relief requests,
communications with Inland Revenue and other such documentation that affects the
Tax or financial position of the Acquired Companies.
(b) Parent, Seller, NMT-US and the Acquired Companies shall promptly
furnish to the Buyer all material financial reports and statements, budgets and
similar items related to the Acquired Companies and NMT-US (with respect to the
US-Based Assets) that are prepared in the ordinary course of business and which
relate to the Business or the Assets between the date hereof and the Closing
Date, including, without limitation, monthly reports of income, sales, revenue
and cash flow, balance sheets and such other reports as are customarily
distributed to senior management.
5.4 EMPLOYEES.
---------
(a) Parent, Seller, NMT-US and the Acquired Companies agree to
encourage the employees of the Business (other than the Excluded Employees) to
continue their employment with the Acquired Companies following the Closing.
(b) Subject to the provisions of Section 2.2(c) and the Transition
Services Agreement, Buyer agrees that it shall cause Neurosciences to continue
to employ Steven Sinyard for a period of four (4) months following the Closing
Date (or such shorter period as may be requested by Parent or as may result from
the earlier termination of Steven Sinyard's employment for any reason other than
a termination by Neurosciences); provided, however, that in the event Steven
Sinyard is not employed by Neurosciences for such four (4) month period, Buyer
shall
39
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reimburse, or cause to be reimbursed, to Seller the unused portion of the
Continued Employee Payment (which reimbursement amount shall be subject to
offset for any amounts for which Buyer, ISC or any of the Acquired Companies has
made a claim for indemnification under Section 14 hereof).
5.5 EXCLUSIVITY. Prior to the Closing Date or the date on which this
-----------
Agreement is terminated pursuant to Section 11, neither Parent, Seller, NMT-US
the Acquired Companies nor any of their respective Affiliates, equityholders,
officers, directors, representatives or agents shall directly, or indirectly
through any other Person, encourage, solicit, initiate, engage or participate in
discussions or negotiations with any Person (other than Buyer) concerning any
merger, consolidation, sale, lease or licensing of assets, sale of equity
interests, or other business combination involving the Assets (including,
without limitation, the US-Based Assets), the Business, the Products or any of
the Acquired Companies, or (b) provide any non-public information concerning the
Assets (including, without limitation, the US-Based Assets), the Business, the
Products, or the operations, properties or assets of any Acquired Company to any
Person (other than Buyer and its representatives). Parent, Seller, NMT-US and
the Acquired Companies shall immediately notify the Buyer of, and shall disclose
to the Buyer all details of, any inquires, discussions or negotiations of the
nature described in the first sentence of this Section 5.5.
5.6 LIMITATIONS ON EMPLOYEE SOLICITATION AND COMPETITION. During the
----------------------------------------------------
period of two (2) years following the Closing Date, none of Parent, NMT-US,
Seller nor any of their Affiliates as of the Closing Date shall:
(a) offer employment to or employ any individual who is or was an
employee of the Acquired Companies (other than Excluded Employees) at the time
of the offer of employment or at any time within one (1) year prior to the offer
employment; or
(b) manufacture, market, distribute or sell any product which has
the same or substantially the same form, function or primary applications as any
of the Products.
The parties hereto agree that the duration and geographic scope of the non-
solicitation and non-competition provisions set forth in this Section 5.6 are
reasonable. In the event that any court determines that the duration or the
geographic scope, or both, are unreasonable and that such provision is to that
extent unenforceable, the parties hereto agree that the provision shall remain
in full force and effect for the greatest time period and in the greatest area
that would not render it unenforceable. The parties intend that these non-
solicitation and non-competition provisions shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective. Parent and Seller agree that damages are an
inadequate remedy for any breach of this provision and that Buyer, ISC and the
Acquired Companies shall, whether or not it is pursuing any potential remedies
at law, be entitled to equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual or threatened breach
of this non-solicitation and non-competition provision.
40
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5.7 EMPLOYEE NOTIFICATION. Prior to the Closing Date, Parent, Seller and
---------------------
the Acquired Companies shall (a) complete all consultations required to be made
with their respective worker's committees or works councils regarding the
transactions contemplated hereby and (b) provide all notices required to be
given to employees regarding the transactions contemplated hereby.
5.8 AGREEMENT ON TRANSFER OF INVENTORY, OTHER ASSETS, ETC.
-----------------------------------------------------
(a) Within 60 days following the Closing Date, and subject to the
terms of the Transition Services Agreement, Parent shall, and shall cause its
Affiliates to, at no cost to Buyer or the Acquired Companies, transfer all of
the Products and other Assets principally related to the Business (other than
the US-Based Assets), including, without limitation, all inventory, consignment
inventory, parts, field samples, sales and marketing materials, customer lists,
customer leads, information, Confidential Information and data related to or
used in the Business, wherever located and in whatever form (including, without
limitation, in electronic, digital or magnetic format), to the Andover Facility;
provided however, this provision shall not apply to Products that constitute
demo equipment located at hospitals and TNS products which are currently leased
to third parties pursuant to leases which are not currently in default.
(b) Within 60 days following the Closing Date, and subject to the
terms of the Transition Services Agreement, NMT-US shall transfer all Products
located in the United States and other Assets related to the Business of the
type described in Section 5.8(a) to NMT-US's Facility located in Atlanta,
Georgia; provided, however, this provision shall not apply to Products that
constitute demo equipment located at hospitals.
(c) As soon as possible following the date hereof, but in no event
later than the five (5) days prior to Closing, Parent, Seller and NMT-US shall
cause to be prepared and delivered to Buyer a list indicating the name and
address of each Person to whom Products were sold by any of the Acquired
Companies or NMT-US since July 8, 1998.
(d) Parent, Seller, NMT-US and their respective Affiliates (i) have
not heretofore and shall not hereafter disclose, provide, allow access to or
otherwise make available to any Person other than Buyer, ISC and their
representatives, except pursuant to a valid and enforceable confidentiality
agreement, any Confidential Information, (ii) shall promptly inform Buyer of any
breach or threatened breach of any confidentiality agreement or other non-
disclosure obligation with respect to any Confidentiality Information (it being
agreed that in the event of any such breach or threatened breach Parent, Seller,
NMT-US and their respective Affiliates shall assign to Buyer, ISC and the
Acquired Companies (or in the event such assignment is not permitted, grant or
cause to be granted to Buyer, ISC or an Acquired Company a power of attorney for
the purpose of enforcing) all rights and remedies under such confidentiality
agreement or other non-disclosure obligation), and (iii) shall, on or prior to
the Closing (or, if earlier, the date of the disposition of the equity or assets
of any of Parent's subsidiaries or Affiliates (other than the Acquired
Companies) engaged in the neuroscience, cryogenic or similar business) ensure
that all such Confidential Information is returned to the Acquired Companies,
including, without limitation, any financial information or data on the Movex
system (except with respect to two Persons to whom Confidential Information has
been provided and whose counsel
41
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has retained one copy of such information under seal pursuant to the terms of a
valid and binding confidentiality agreement and with whom neither Parent nor any
of its Affiliates is currently in active discussions).
5.9 ACCOUNTING REFERENCE DATE CHANGE; SCHEDULES; SALES AND TRANSFER
---------------------------------------------------------------
TAXES; FEES.
- -----------
(a) Parent and Seller shall cause each of the Acquired Companies to
pass, effective immediately prior to the Closing Date, a resolution of its Board
of Directors changing the accounting reference date of such Acquired Company to
the Closing Date and shall give notice of such change to the Registrar of
Companies in accordance with Section 225 of the Companies Act, 1985.
(b) Schedule 5.9(b) hereto sets forth a reasonable estimate of
---------------
the following information with respect to each Acquired Company for the 1998 Tax
year: (i) the Tax basis of each Acquired Company's assets; (ii) the amount of
any net operating loss, net capital loss and unused credits of each Acquired
Company; and (iii) the amount of any deferred gain or loss allocable to each
Acquired Company arising out of any intercompany or intergroup transactions, and
group surrender and relief. For the 1999 Tax year and the Stub Tax Period,
Parent and Seller shall provide Buyer such information set forth in (i) through
(iii) of this Section 5.9(b) with respect to each Acquired Company no later than
30 days' prior to the time the relevant Returns and computations are required to
be filed for such year and such information shall be in form and substance
reasonably satisfactory to Buyer and the Acquired Companies. In the event that
the information contemplated by the immediately preceding sentence is not timely
provided or is not reasonably satisfactory to Buyer and the Acquired Companies
in the form provided, Buyer and the Acquired Companies shall, at Parent's and
Seller's sole cost and expense, direct their accountants and financial personnel
to prepare such information and Parent and Seller shall reimburse Buyer and the
Acquired Companies for the full amount of such preparation costs and expenses
immediately upon receipt of written notice thereof (with reasonable supporting
detail) from Buyer or the Acquired Companies.
(c) Schedule 5.9(c) hereto sets forth a reasonable estimate of the
---------------
following information with respect to each Acquired Company for the 1998 Tax
year: (i) the amount of current and accumulated earnings and profits as of the
date hereof and the amount expected as of the Closing Date; (ii) the amount of
previously taxed income within the meaning of Section 959 of the Code as of the
date hereof and the amount expected as of the Closing Date (taking into account
the amount of dividend income to NMT Medical, Inc. or any of its subsidiaries
under Section 1248 of the Code from the transaction contemplated by this
Agreement); and (iii) the amount, if any, NMT Medical, Inc. or any of its
subsidiaries, or the Buyer would be required to include in gross income with
respect to each such Acquired Company pursuant to Section 951 of the Code if the
taxable year of such Acquired Company were deemed to end on the Closing Date.
For the 1999 Tax year and the Stub Tax Period, Parent and Seller shall provide
Buyer such information set forth in (i) through (iii) of this Section 5.9(c)
with respect to each Acquired Company no later than 30 days' prior to the time
the relevant Returns and computations are required to be filed for such year. In
the event that the information contemplated by the immediately preceding
sentence is not timely provided or is not reasonably satisfactory to Buyer
42
<PAGE>
and the Acquired Companies in the form provided, Buyer and the Acquired
Companies shall, at Parent's and Seller's sole cost and expense, direct their
accountants and financial personnel to prepare such information and Parent and
Seller shall reimburse Buyer and the Acquired Companies for the full amount of
such preparation costs and expenses immediately upon receipt of written notice
thereof (with reasonable supporting detail) from Buyer or the Acquired
Companies.
(d) All transfer, documentary, sales, use, registration, stamp and
other such Taxes (including all applicable real estate transfer or gains Taxes)
and related fees (including any penalties, interest and additions to Tax)
incurred in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, the transfer of the Shares and the
Assets, shall be borne equally by Parent, Seller and NMT-US, on the one hand,
and Buyer and ISC, on the other hand. Parent, Seller, NMT-US, Buyer and ISC
shall cooperate timely in making all filings, Tax Returns, reports and forms as
may be required to comply with the provisions of such Tax laws.
(e) Parent, Seller and NMT-US shall deliver to Buyer and ISC at the
Closing all necessary forms and certificates complying with applicable law, in
form and substance satisfactory to Buyer, duly executed and acknowledged,
certifying that the transactions contemplated hereby are exempt from withholding
under the Code (including Section 1445 thereunder) and any provision of foreign,
state or local law.
(f) Parent, Seller and NMT-US shall cause the provisions of any Tax
allocation or sharing agreement, whether or not written, or similar arrangement
that may have been entered into by Parent, Seller, NMT-US or any of their
respective Affiliates and the Acquired Companies to be terminated on or before
the Closing Date, and no payments which are owed by or to the Acquired Companies
pursuant thereto shall be made thereunder. After the Closing Date, no party
shall have any rights or obligations under any such Tax allocation or sharing
agreement or similar arrangement.
5.10 RIGHT TO "NEUROSCIENCES" NAME; USE OF "NMT" NAME. Parent, Seller,
------------------------------------------------
NMT-US and each of their relevant Affiliates (other than the Acquired Companies)
confirm and, at Closing, shall reconfirm, to Buyer, ISC and the Acquired
Companies that they have no objection to Buyer, ISC or any of the Acquired
Companies or their respective Affiliates using the word "Neurosciences" (and all
derivatives thereof), whether alone or in combination with any other text or
graphics (collectively, the "Tradename"). In addition, Parent and Seller
acknowledge and agree that, while neither Buyer or ISC is acquiring ownership of
the acronym "NMT" (or any derivatives thereof), Buyer and the Acquired Companies
shall have, for a period of three (3) years from Closing, a limited license to
continue to use the acronym "NMT" to the extent that the same appears or is used
upon any promotional or marketing materials, brochures, information, labels,
packaging or similar materials related to any of the Products or used in
connection with the Business, in each case as exist on the Closing Date.
Following the Closing Date, Seller, directly or indirectly through an Affiliate,
shall have the reasonable right to monitor the quality of Products bearing the
acronym "NMT". The license to the acronym "NMT" granted under this Section 5.10
is subject to and conditioned on the maintenance of Product quality consistent
with the quality of the Products measured on the date hereof.
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5.11 SECTION 338 ELECTION. Buyer shall not make an election under Section
--------------------
338(g) of the Code with respect to the purchase of the Shares (the "Election")
unless Parent provides written consent for such election which consent shall not
be unreasonably withheld, delayed or conditioned. If such Parent consent is
withheld, Parent shall provide Buyer a report prepared by a nationally
recognized accounting firm showing the present value (discounted at 8%)
incremental tax cost to Parent of such Election. In the event that Buyer
indemnifies Parent for such incremental tax cost, Buyer shall be permitted to
make such Election.
5.12 CONTINUATION OF PARENT INSURANCE COVERAGE. On or prior to the
-----------------------------------------
Closing Date, Parent shall obtain, and shall, for a period of not less than five
(5) years thereafter, maintain in full force and effect, continuation or "tail"
insurance policy coverage in respect of its product liability insurance with
respect to the Products, which coverage shall be in such amounts and of such
types consistent with Parent's product liability coverage in effect immediately
prior to Closing.
5.13 AGREEMENT REGARDING ACCOUNTS RECEIVABLE. In the event that Parent or
---------------------------------------
Seller make any indemnification payment to Buyer or any of the Acquired
Companies as a result of the failure of any accounts receivable of the Acquired
Companies at Closing to be collected within 90 days of the date of their
creation (or within such longer period set forth on Schedule 3.5(d)(ii)), Buyer
-------------------
and the Acquired Companies shall assign to Parent or Parent's designee all of
their respective right, title and interest in and to such accounts receivable
for which Buyer or the Acquired Companies have actually received indemnification
payment.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND ISC. All of the
----------------------------------------------------
obligations of Buyer and ISC to consummate the transactions contemplated by this
Agreement and the Related Agreements shall be contingent upon and subject to the
satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by
Buyer for purposes of consummating such transactions, but without prejudice to
any other right or remedy which Buyer or ISC may have hereunder as a result of
any misrepresentation by, or breach of any covenant, representation or warranty
of, Seller, Parent, NMT-US or any Acquired Company contained in this Agreement
or any other certificate or instrument furnished by Parent, Seller or NMT-US
hereunder. To the extent that a representation is not qualified as to the best
knowledge of or as to a Material Adverse Effect then it must be true in all
material aspects.
6.1 REPRESENTATIONS AND WARRANTIES OF PARENT, SELLER, NMT-US. The
--------------------------------------------------------
representation and warranties made by Parent, Seller and NMT-US to Buyer in
Section 3 of this Agreement shall be true and correct in all material respects
(except for such representations and warranties as are qualified by materiality
or made to the best knowledge, which shall be true and correct) on and as of the
Closing Date with the same force and effect as though such representations and
warranties had been made on and as of such time, except and solely to the extent
such representations and warranties speak as of a different date.
6.2 COVENANTS OF PARENT, SELLER, NMT-US AND ACQUIRED COMPANIES. Parent,
----------------------------------------------------------
Seller, NMT-US and each of the Acquired Companies shall have performed in all
material
44
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respects all of the covenants, acts and undertakings to be performed by them on
or prior to the Closing Date.
6.3 NO INJUNCTION, ETC. No action, proceeding, investigation,
------------------
regulation or legislation shall have been instituted or threatened before any
Governmental Authority to enjoin, restrain, or prohibit the consummation of the
transactions contemplated hereby, or the ownership of any of the Shares or
Assets, or operation of the Business by Buyer, ISC or any of their respective
Affiliates following the Closing.
6.4 ABSENCE OF ADVERSE CHANGES. Since the Reference Date, there shall
--------------------------
have been no material adverse change in the value or condition of, or title to
the Shares, the Assets (including the US-Based Assets), the Business or the
Products.
6.5 FINANCIAL ACCOUNTING SYSTEM. The Acquired Companies shall have
---------------------------
placed a purchase order with respect to an updated Chameleon financial and
accounting software system that shall allow the Acquired Companies to operate
with respect to such matters on a stand-alone basis without any need for data or
software from any other Person, including, without limitation, any information
contained on the Movex system.
6.6 PRE-CLOSING DIVIDEND. Each of the Acquired Companies shall have
--------------------
declared and paid the Pre-Closing Dividend.
6.7 OTHER DELIVERIES. Parent, Seller and NMT-US shall have delivered
----------------
each of the Closing deliveries specified in Section 12.2(a).
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARENT, SELLER AND NMT-US.
--------------------------------------------------------------------
All of the obligations of Seller, Parent and NMT-US to consummate the
transactions contemplated by this Agreement shall be contingent upon and subject
to the satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by
Parent for purposes of consummating such transactions, but without prejudice to
any other right or remedy which it may have hereunder as a result of any
misrepresentation by, or breach of any covenant, representation warranty of
Buyer or ISC contained in this Agreement, or any certificate or instrument
furnished by it hereunder. To the extent that a representation is not qualified
as to the best knowledge of or as to a Material Adverse Effect then it must be
true in all material aspects.
7.1 REPRESENTATIONS AND WARRANTIES OF BUYER AND ISC. The representations
-----------------------------------------------
and warranties made by Buyer and ISC to Parent, Seller and NMT-US in Section 4
of this Agreement shall be true and correct in all material respects (except for
such representations and warranties as are qualified by materiality or made to
the best knowledge, which shall be true and correct) in as of the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of such date, except and solely to the extent such
representations and warranties speak of a different date.
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7.2 COVENANTS OF BUYER AND ISC. Buyer and ISC shall have performed in
--------------------------
all material respects all of the covenants, acts and undertakings to be
performed by it on or prior to the Closing Date.
7.3 NO INJUNCTION, ETC. No action, proceeding, investigation,
-------------------
regulation or legislation shall have been instituted or threatened before
Governmental Authority to enjoin, restrain, prohibit the consummation of the
transactions contemplated hereby.
7.4 OTHER DELIVERIES. Buyer and ISC shall have delivered each of the
----------------
Closing deliveries specified in Section 12.2(b).
8. PUBLICITY. So long as this Agreement is in effect, the Buyer and Parent
---------
shall use all reasonable efforts to develop a joint communications plan and each
party shall use all reasonable efforts (a) to ensure that all press releases and
other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan and (b) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby. Notwithstanding the
foregoing, the parties agree that the form of press releases attached hereto as
Exhibit F shall be issued following the date hereof.
- ---------
9. CONFIDENTIALITY. Prior to the Closing, the parties hereto, and their
---------------
representatives and assignees shall hold confidential all Confidential
Information obtained from each of the other parties, and their respective
Affiliates in connection herewith and, if the Closing shall be abandoned as
provided herein, shall treat such information as confidential and, where such
information is in documentary form, return such information to Parent; provided,
however, Buyer's counsel may retain one copy of such information for its files.
The provisions of this Section 9 shall not apply to information which is in the
public domain due to no fault of Buyer or its representatives. The parties
hereto, on their own behalf and on behalf of their respective representatives
and assignees, agree that damages are an inadequate remedy for breach of this
provision and that the non-breaching party shall, whether or not it is pursuing
any potential remedies at law, be entitled to equitable relief in the form of
preliminary and permanent injunctions without the posting of a bond or other
security upon any actual or threatened breach of this Section 9.
10. COOPERATION. From time to time after the Closing, Parent, Seller, NMT-US,
-----------
Buyer and ISC shall, and shall cause their respective Affiliates to, at the
reasonable request of Buyer or Parent, as the case may be, and without further
consideration, execute and deliver such further instruments of assignment,
transfer, license or assumption and take such further actions Buyer or Parent
may reasonably request in order more effectively to transfer, reduce to
possession, vest in, and record title to any of the Shares or the Business
(other than the US-Based Assets) more fully to Buyer, or the US-Based Assets
more fully to ISC or to implement the assumption and retention by Parent and
Seller of the Excluded Liabilities, including, without limitation, cooperation
before and after the Closing on matters relating to the retention of certain of
the Acquired Companies' personnel by Buyer, integration of sales force activity,
identification of the Assets, ordering and relocation of inventory, and
preservation of relationships with customers, suppliers and
46
<PAGE>
distributors. The parties shall render, at no additional cost or charge to the
other, such cooperation to one another with respect to such matters and with
respect to such other matters concerning the transition of control of the
Business as reason and commercial prudence dictate should be addressed before
and after the Closing; provided, however, that reasonable out of pocket expenses
incurred in compliance with this Section 10 by one party at the request of
another party shall be promptly reimbursed by the requesting party to the party
incurring such expenses.
11. TERMINATION.
-----------
11.1 BOTH PARTIES. This Agreement may be terminated at any time prior
------------
to the Closing: (a) by the mutual consent of Parent and Buyer; (b) by Parent or
Buyer if there shall be any action or proceeding (other than an action or
proceeding commenced or induced by a party hereto or by a party claiming a
successor interest to a party hereto seeking to terminate or restrain
performance under this Agreement) instituted by any Governmental Authority which
shall seek to restrain, assess Liability in respect of, or prohibit or
invalidate the transactions contemplated by this Agreement and which, in the
judgment of such party, made in good faith and based upon the advice of its
counsel, makes it inadvisable to proceed with the Closing; or (c) by Parent or
Buyer if, through no fault of the terminating party, the Closing shall not have
occurred by April 30, 2000.
11.2 BUYER. This Agreement may be terminated by Buyer: (a) at any time
-----
prior to the Closing, if any of Parent, Seller, NMT-US or any Acquired Company
shall have failed to comply in any material respect with any of its covenants or
agreements contained in this Agreement and such failure shall not have been
rectified during the period of twenty-eight (28) days after written notification
thereof to Parent, (b) at any time prior to the Closing, if there shall be any
action or proceeding (other than an action or proceeding commenced or induced by
a party hereto or by a party claiming a successor interest to a party hereto
seeking to terminate or restrain performance under this Agreement) instituted by
or before any court or other Governmental Authority which could reasonably be
expected to materially affect the right of Buyer to own, operate or control the
Shares, the Assets (other than the US-Based Assets) or the Business, or the
right of ISC to own, operate or control the US-Based Assets, subsequent to the
Closing and which makes it impractical to proceed with the Closing; or (c) if
any of the conditions precedent to the performance of its obligations at the
Closing shall not have been fulfilled on or prior to April 30, 2000.
11.3 PARENT. This Agreement may be terminated by Parent: (a) at any time
------
prior to the Closing, if either of Buyer or ISC shall have failed to comply in
any material respect with any of its covenants or agreements contained in this
Agreement and such failure shall not have been rectified during the period of
twenty-eight (28) days after written notification thereof to Buyer or (b) if any
of the conditions precedent to the performance of its obligations at the Closing
shall not have been fulfilled on or prior to April 30, 2000.
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11.4 EFFECT OF TERMINATION.
---------------------
(a) In the event of termination of this Agreement by either Parent
or Buyer as provided in Sections 11.1, 11.2 or 11.3, this Agreement shall
forthwith become void and there shall be no Liability or obligation on the part
of Parent, Seller, NMT-US, any of the Acquired Companies, Buyer or ISC, or their
respective Affiliates, representatives, officers or directors, except (i) with
respect to Section 9, this Section 11.4, Section 16.2, Section 16.10 and Section
17, (ii) with respect to any Liabilities or damages incurred or suffered by a
party as a result of the willful breach by the other party of any of its
covenants or other agreements set forth in this Agreement.
(b) In the event that this Agreement is terminated by Buyer
pursuant to Section 11.2(a) or 11.2(c) (as a result of the failure of any
condition precedent specified in Section 6.1 or 6.2), then the Parent, Seller
and the Acquired Companies shall, jointly and severally, be obligated to pay to
Buyer a cash fee of US$750,000, which amount shall be payable by wire transfer
of immediately available funds no later than two (2) Business Days after such
termination.
(c) In the event that this Agreement is terminated by Parent
pursuant to Section 11.3(a) or 11.3(b) (as a result of the failure of any
condition precedent specified in Section 7.1 or 7.2, then Buyer shall pay to
Parent a cash fee of US$750,000, which amount shall be payable by wire transfer
of immediately available funds no later than two (2) Business Days after such
termination.
12. CLOSING.
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12.1 TIME AND PLACE OF CLOSING. The meeting (the "Closing") of the
-------------------------
parties at which the sale, assignment, transfer, endorsement and delivery of the
Shares to Buyer, and the payment of the Purchase Price by Buyer to Seller, are
completed, shall be held at a location mutually acceptable to the parties at
10:00 a.m. (local time) on such date as may be mutually agreed to in writing by
the parties, but in no event later than April 30, 2000.
12.2 PARENT/SELLER/NMT-US CLOSING DELIVERIES
---------------------------------------
(a) At the Closing, Parent, Seller and NMT-US shall deliver (and/or
cause their Affiliates to deliver) to Buyer the following:
(i) transfers in common form relating to all Shares duly
executed in favor of the Buyer (or as it may direct);
(ii) share certificates relating to the Shares;
(iii) such bills of sale, assignments, assignments of leases,
deeds, licenses and other instruments of assignment, conveyance and transfer, in
form and substance reasonably satisfactory to Buyer, if any, as shall be
necessary to convey to and vest in Buyer all of Parent's and Seller's right,
title and interest in and to the Shares and to vest in the Acquired Companies,
the Assets (other than the US-Based Assets);
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(iv) such bills of sale, assignments, assignments of leases,
deeds, licenses and other instruments of assignment, conveyance and transfer, in
form and substance reasonably satisfactory to ISC, as shall be necessary to
convey to and vest in ISC all of Parent's and NMT-US's right, title and interest
in and to the US-Based Assets and to vest in ISC the US-Based Assets;
(v) such instruments acknowledging Parent's and Seller's
assumption and retention of the Excluded Liabilities, in form and substance
reasonably satisfactory to Buyer, as shall be effective to assure Buyer that
Parent and Seller will perform, or caused to be performed, all obligations
related to the Excluded Liabilities following the Closing;
(vi) a certificate, signed by the President and the Chief
Financial Officer of Parent, certifying to the fulfillment of the conditions set
forth in Sections 6.1 and 6.2 hereof;
(vii) copies or satisfactory evidence of the consents, waivers and
approvals described in Section 2.6 and listed on Schedule 2.6(c), together with
such UCC-3 Termination Statements from Parent's secured creditors as Buyer may
reasonably request;
(viii) a legal opinion of UK counsel to each of Parent and Seller in
the form of Exhibit G attached hereto;
----------
(ix) such other evidence of the performance of all covenants and
satisfaction of all conditions required of the Parent, Seller and NMT-US by this
Agreement, at or prior to the Closing, as Buyer or its counsel may reasonably
require;
(x) a copy of the resolutions of the Board of Directors of each
of Parent, Seller, NMT-US and the Acquired Companies authorizing and approving
the Agreement, the Related Agreements and all other transactions and agreements
contemplated hereby and thereby;
(xi) an undertaking by Parent, on behalf of itself and each of its
Affiliates, that it will not object to the use of the Tradename by Buyer and its
Affiliates following the Closing;
(xii) a Transition Services Agreement, in substantially the form of
Exhibit H hereto;
- ---------
(xiii) a listing of all accounts receivables included in the Assets
as of a date not more than two (2) business days prior to the Closing Date, duly
certified by the Chief Financial Officer of Parent as true and correct; and
(xiv) resignations in the agreed terms duly executed as deeds of
all the directors (other than Patrick Sparkes) and the secretary of any Acquired
Company from their offices as director or secretary of and their employment with
any Acquired Company containing a confirmation that they have no claims (whether
statutory, contractual or otherwise) against any Acquired Company for
compensation for loss of office or termination of employment or for
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unpaid remuneration or otherwise together with delivery to the Buyer of all
property of any Acquired Company in their possession or under their control;
(xv) the written resignations of the auditors or each Acquired
Company containing an acknowledgement that they have no claim against any
Acquired Company for compensation for loss of office, professional fees or
otherwise and a statement under section 394(i) of the Companies Act 1985;
(xvi) the common seals, certificates of incorporation and
statutory books, share certificate books and cheque books of each Acquired
Company;
(xvii) all land certificates, charge certificates, leases title
deeds and other documents relating to the Real Property (except to the extent
that the same are in possession of mortgagees pursuant to mortgages disclosed in
Schedule 3.15(b)(i);
(xviii) to the extent not in the possession of any Acquired Company,
all books of account or references as to customers and/or suppliers and other
records and all insurance policies in any way relating to or concerning the
businesses of any Acquired Company;
(xix) to the extent not in the possession of any Acquired Company,
all licenses, consents, Permits and authorizations obtained by or issued to any
Acquired Company or any other person in connection with the business carried on
by any of them and such contracts, deeds or other documents (including
assignments of any such licenses) as shall have been acquired by the Buyer prior
to the date hereof;
(xx) duly executed transfers of each share (other than the
Shares) in the Acquired Companies not registered in the name of any Acquired
Company in favor of the Buyer (or as it may direct);
(xxi) share certificates relating to all of the issued shares (not
including the Shares) in the capital of each of the Acquired Companies;
(xxii) a release in the agreed terms duly executed as a deed in a
form such satisfactory to the Buyer releasing each Acquired Company and their
respective officers and employees from any liability whatsoever (actual or
contingent) which may be owing to the Parent or Seller by any Acquired Company
except those arising in the ordinary course of trade;
(xxiii) a funds flow memo prepared by Parent's accountants setting
forth the transactions among and between the parties hereto in connection with
the transactions contemplated hereby;
(xxiv) such other certificates, instruments and other documents
reasonably requested by Buyer to effect the transactions contemplated hereby,
all of which shall be reasonably satisfactory in form and substance to Buyer and
its counsel.
(b) PARENT/SELLER CLOSING RESOLUTIONS. At or prior to Closing (and prior
to the taking effect of the resignations of the directors referred to in Section
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12.2(a)(xiv) above), Parent and Seller shall procure the passing of board
resolutions of each Acquired Company:
(i) sanctioning for registration (subject to where necessary to
due stamping) the transfers in respect of the Shares and any shares to which
Section 12.2(a)(xx) refers;
(ii) authorizing the delivery to the Buyer of share certificates
in respect of the Shares and any shares to which Section 12.2(a)(xx) refers;
(iii) appointing Stuart M. Essig and John B. Henneman, III to be the
directors and John B. Henneman, III to be the secretary of each Acquired
Company; and
(iv) revoking all mandates to bankers and giving authority in
favor of the directors appointed under Section 12.2(b)(iii) above or such other
persons as the Buyer may nominate to operate the bank accounts thereof.
(c) Parent and Seller shall procure that prior to or at Closing:
(i) there are repaid in full all sums (if any) owing to any
Acquired Company by the Seller or the Parent or any member of their group (other
than any of the Acquired Companies) or by the directors of any Acquired Company
or any of their connected persons except those arising in the ordinary course of
trade and whether or not such sums are due for repayment; and
(ii) each Acquired Company is released from any guarantee,
indemnity, bond, letter of comfort or Lien or other similar obligation given or
incurred by it which relates in whole or in part to debts or other liabilities
or obligations whether actual or contingent, of any person other than an
Acquired Company;
and prior to such repayment or release the Parent and Seller undertake
to Buyer (on behalf of themselves and as trustee on behalf of each Acquired
Company) to keep each Acquired Company fully indemnified against any failure to
make any such repayment or any liability arising under any such guarantee,
indemnity, bond, letter of comfort or Lien.
(d) BUYER/ISC CLOSING DELIVERIES. At the Closing, Buyer and ISC shall
deliver to Parent the following:
(i) evidence (which shall consist of a United States federal
reference number) of the wire transfer of the Share Payment and US-Based Assets
Payment to the appropriate parties;
(ii) a certificate, signed by a duly authorized officer of Buyer,
certifying to the fulfillment of the conditions set forth in Sections 7.1 and
7.2 hereof;
(iii) satisfactory evidence of the approvals, consents and
notifications listed on Schedule 4.2;
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(iv) such other evidence of the performance of all the covenants and
satisfaction of all of the conditions required of Buyer and ISC by this
Agreement at or before the Closing as the Parent or its counsel may reasonably
require; and
(v) a copy of the resolutions of the Boards of Directors of the
Buyer and ISC authorizing and approving the Agreement and all other transactions
and agreements contemplated hereby.
13. [INTENTIONALLY OMITTED]
14. INDEMNIFICATION.
----------------
14.1 INDEMNIFICATION BY PARENT AND SELLER. Parent, NMT-US and Seller
-------------------------------------
shall, jointly and severally, indemnify and hold Buyer, ISC and their respective
Affiliates (including, without limitation, the Acquired Companies following the
Closing), and their respective directors, officers, employees and
representatives (collectively, "Buyer Indemnified Parties") harmless from and
against all damages, losses, costs, claims, expenses, interest, penalties and
Liabilities including reasonable attorneys' and accountants' fees and costs of
investigation (collectively, "Damages") suffered or incurred, directly or
indirectly, by any Buyer Indemnified Party arising from or related to:
(a) subject to the limitations set forth in Section 14.4, the
breach or falsity of any representation or warranty of Parent, Seller, NMT-US or
any Acquired Company contained herein;
(b) any of the matters disclosed or required to be disclosed on
Schedule 3.7(a), Schedule 3.7(b), Schedule 3.8(b)(ii), Schedule 3.8(c), Schedule
3.9(c), Schedule 3.13(ii), Schedule 3.17, or Schedule 3.20;
(c) the breach of any covenant by Parent, Seller, NMT-US or, prior
to the Closing, any Acquired Company, contained herein; or
(d) any of the Excluded Liabilities.
14.2 INDEMNIFICATION BY BUYER AND ISC. Buyer and ISC shall, jointly and
---------------------------------
severally, indemnify and hold the Parent, Seller, NMT-US, and their respective
Affiliates, and their respective directors, officers, employees and
representatives (collectively, "Seller Indemnified Parties") harmless from and
against all Damages suffered or incurred, directly or indirectly, by any Seller
Indemnified Party arising from or related to:
(a) subject to the limitations set forth in Section 14.4, the
breach or falsity of any representation or warranty of Buyer or ISC contained
herein;
(b) the breach of any covenant by Buyer or ISC contained herein; or
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(c) any of the Acquired Liabilities following the Closing (except
those relating to a breach of a covenant, representation or warranty by any of
Parent, Seller, NMT-US or any of the Acquired Companies).
14.3 TAX INDEMNIFICATION AND OTHER TAX MATTERS
-----------------------------------------
(a) Notwithstanding anything to the contrary in the Agreement,
Parent, Seller and NMT-US shall, jointly and severally, indemnify, save and hold
harmless the Buyer Indemnified Parties from and against any and all Damages
incurred in connection with, arising out of, resulting from or relating to (i)
any fact inconsistent with, or any untruth, inaccuracy or breach of, any
representation, warranty or covenant of Parent, Seller, NMT-US or any of the
Acquired Companies or the Seller contained in Sections 2.2(c) (with respect to
the 1998/1999 Tax Make-Whole Payment), 3.7, 5.2(f)(vi), 5.9 or 5.11, and (ii) to
the extent not covered in foregoing clause (i), paid under Section 2.2(c) or
reflected in the accrual for Taxes (other than any accrual for deferred Taxes
established to reflect timing differences between book and Tax income) on the
Closing Date Balance Sheet, any and all Taxes attributable to the Acquired
Companies and the US-Based Assets (A) with respect to all periods ending on or
prior to the Closing Date, and (B) with respect to the Stub Tax Period. For the
purposes of this Agreement, the period from January 1, 2000 through and
including the Closing Date is referred to as the "Pre-Closing Period" and any
period thereafter is referred to herein as the "Post-Closing Period."
(b) For purposes of this Section 14.3, Tax or Taxes shall include
the amount of Taxes which would have been paid but for the application of any
credit or net operating or capital loss deduction attributable to periods or
portions of a period beginning after the Closing Date.
(c) For the avoidance of doubt, the parties agree that the
provisions of this Section 14.3 shall be interpreted and applied in such a
manner such that none of Buyer, ISC or any of the Acquired Companies shall be
entitled to double or multiple recovery with respect to any Damages (i.e., to
the extent that Buyer is paid out in full under Section 2.2(c) for an under-
accrual of Taxes for the 1998 or 1999 Tax year, none of Buyer, ISC or any of the
Acquired Companies shall be entitled to indemnification under this Section 14.3
on the basis of said under-accrual).
(d) Buyer or its duly authorized agents shall cause the Acquired
Companies to prepare and file all Returns in respect of Taxes for periods ending
after the Closing Date. Seller or its duly authorized agents shall prepare and
file all Returns in respect of Taxes for periods ending prior to or on the
Closing Date, including, without limitation, the Stub Tax Period. Seller or its
duly authorized agents shall conduct the preparation, submission and agreement
of all United Kingdom Tax Returns of the Acquired Companies (and correspondence
and other documentation relating thereto) for all accounting periods ending on
or before the Closing Date, subject to all such Returns (including workpapers)
being submitted in draft form to Buyer or its duly authorized agents for comment
and approval within a reasonable time before they are due to be sent to Inland
Revenue. If Buyer or its agents have any comments, Seller and its agents shall
not unreasonably refuse to adopt such comments. Seller and Buyer shall
respectively afford (or procure to be afforded) to the other or their agents
such information and assistance as may reasonably be required to prepare, submit
and agree all relevant Tax Returns. Buyer shall provide
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that the Acquired Companies shall cause the Returns (and correspondence and
other documentation relating thereto) referred to in this Section to be
authorized, signed and returned to Seller for submission to the appropriate
authority without undue or unreasonable delay. Nothing herein shall oblige Buyer
to submit any Return or other document unless it is satisfied that it is
accurate and complete in all material respects. Promptly after the Acquired
Companies or Buyer acquires actual knowledge of an amount of Taxes due and
unpaid with respect to any period ending on or before the Closing Date, the
Acquired Companies or Buyer, as the case may be, shall give notice thereof to
Parent. Parent shall pay the amount of such Taxes Buyer (or Buyer's designee),
within 30 days after the receipt of such notice.
(e) Parent and Buyer agree to give prompt notice to each other of any
proposed adjustment to Taxes for periods ending on or prior to the Closing Date.
Seller shall have the right to conduct any audit or proceeding with respect to
Taxes involving the Acquired Companies for such period(s) provided that: (i)
Buyer is kept fully informed of all relevant material matters relating to the
Tax affairs of the Acquired Companies; (ii) Buyer receives copies of all
relevant material written correspondence from any Tax authority; (iii) no
material written communication is sent to any Tax authority without first
submitting in draft form to Buyer allowing reasonable time for comment (such
comments not to be unreasonably withheld or delayed); (iv) any reasonable
comments made by Buyer are incorporated into the relevant document; and (v)
nothing shall oblige Buyer to submit any Return or other document unless it is
satisfied that it is accurate and complete in all material respects. Buyer or
the Acquired Companies shall have the right at their option and expense to
participate in any audit or proceeding with respect to Taxes involving the
Acquired Companies for such period(s).
14.4 LIMITATIONS ON INDEMNIFICATION.
-------------------------------
(a) Survival. All representations, warranties and covenants
contained herein and each of the Related Agreements shall survive the execution
and Closing of this Agreement; provided, however, that any claim for
indemnification under Sections 14.1, 14.2 or 14.3 for the breach or falsity of
any representation or warranty (but not covenants) must be made by giving
written notice of such claim to the party from whom indemnity is sought not
later than eighteen (18) months after the Closing Date; except, that:
(i) the survival period for the representation or warranties
under Section 3.11, 3.12 and 3.20 shall be five (5) years after the Closing
Date;
(ii) the survival period for the representation or warranties
under Sections 3.3, 3.15(a)(i) and 3.15(b)(ii), shall be seven (7) years from
the Closing Date; and
(iii) the survival period for the representation or warranties
under Section 3.7 shall be until thirty (30) days after the applicable statute
of limitations has run.
(b) Threshold. There shall be no indemnification for any such
claim for breach of representation or warranty under Sections 14.1 or 14.2
unless the amount of any such single claim exceeds US$50,000 (excluding costs
and interest claimed) and until the aggregate amount of all claims which each
exceed US$50,000 (excluding costs and interest claimed) made by the
54
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party seeking indemnification exceeds an amount equal to US$200,000, after which
time such party shall be fully indemnified for all such claims (to the extent
provided in Sections 14.1 or 14.2, as the case may be) from the first dollar of
each such claim (including the amounts used to satisfy the US$200,000 threshold
set forth in this Section 14.4); provided, however, that the foregoing
limitations shall not apply to any claims for indemnification under Sections
14.1(b), 14.1(d), 14.2(c) or 14.3; provided, further, that for purposes of
further clarification, the parties agree that the foregoing limitations shall
not apply with respect to the breach of any covenant of any party to make
payment to any other party hereunder, including, without limitation, any breach
of the payment obligations contained in Section 2, Section 5, Section 11 or
Section 14 of this Agreement.
(c) Maximum Liability. The cumulative maximum liability
(including costs and interest claimed) of Parent, Seller and NMT-US for
indemnification pursuant to Section 14.1(a) and Section 14.1(c) shall not exceed
the amount of the Purchase Price.
14.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
---------------------------
indemnification hereunder, the party seeking indemnification (the "Indemnified
Party") shall promptly notify the party from whom indemnification is sought (the
"Indemnifying Party") of the claim and, when known, the facts constituting the
basis for such claim. For purposes of this Section 14.5, notice shall be deemed
to be promptly made if it is given to the Indemnifying Party within ten (10)
days of receipt by the Indemnified Party of any written notice of any third
party claim. In the event of any claim for indemnification under this Agreement
resulting from or in connection with any claim or legal proceedings by a third
party, the notice to the Indemnifying Party shall specify, if known, the amount
or an estimate of the amount of the Liability arising from such claim or legal
proceeding. Except as provided in Section 14.6 of this Agreement, the
Indemnified Party shall not settle or compromise any claim by a third party for
which it may claim indemnification under this Agreement without the prior
written consent of the Indemnifying Party.
14.6 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim by an
------------------------------
Indemnified Party resulting from or arising out of any claim or legal proceeding
by a person who is not a party to this Agreement, the Indemnifying Party at its
sole cost and expense may, upon written notice to the Indemnified Party, assume
the defense of any such claim or legal proceeding if it acknowledges to the
Indemnified Party in writing its obligation to indemnify the Indemnified Party
with respect to all elements of such claim. The Indemnified Party shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. If the Indemnifying Party does not
assume the defense of any such claim or litigation resulting therefrom within
thirty (30) days after the date of such claim is made, (a) the Indemnified Party
may defend against such claim or litigation, in such manner as it may deem
appropriate, including, but not limited to, settling such claim or litigation,
after giving notice of the same to the Indemnifying Party, on such terms as the
Indemnified Party may deem appropriate, and (b) the Indemnifying Party shall be
entitled to participate in (but not control) the defense of such action, with
its own counsel and at its own expense.
14.7 PAYMENT OF INDEMNIFICATION OBLIGATION. All indemnification
--------------------------------------
hereunder shall be effected by payment of cash or delivery of a cashier's or
certified check in the
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amount of the indemnification Liability. Any indemnification payment by a Seller
to Buyer hereunder shall be deemed to be a reduction in the Purchase Price.
14.8 EXCLUSIVE REMEDY. The rights of indemnification set forth in this
----------------
Section 14 shall be, from and after the Closing Date, the exclusive remedy of
each party for the breach by the other party of any representation, warranty,
covenant or other term in this Agreement, except for claims based upon fraud and
claims for specific performance or other equitable relief
14.9 ELEKTA AGREEMENT. If Buyer or, following the Closing, any of the
----------------
Acquired Companies, suffers Damages as a result of a condition or event that
does not constitute a breach by Parent, Seller or NMT-US under this Agreement
but such condition or event constitutes a breach by Elekta under the Elekta
Agreement and would permit Parent, Seller or NMT-US to seek indemnification from
Elekta pursuant to the terms of the Elekta Agreement, Parent, Seller and NMT-US
agree to seek such indemnification and to deliver to Buyer or such Acquired
Company, as the case may be, all amounts so recovered. Buyer agrees to reimburse
Parent, Seller and NMT-US for all reasonable expenses incurred in connection
with seeking such indemnification to the extent not required to be paid by
Elekta under the Elekta Agreement.
15. ADDITIONAL ACTIONS.
-------------------
15.1 SERVICES. The parties recognize that in order for Buyer to assume
--------
control of the Acquired Companies and the Business and for ISC to assume control
of the US-Based Assets in an orderly manner it will be necessary for Parent,
Seller, NMT-US and their respective Affiliates (other than the Acquired
Companies) to assist Buyer, ISC and their Affiliates in the performance of
certain business support functions after the Closing in view of the fact that
the Acquired Companies and the Business have not been a freestanding enterprise.
Understanding that Buyer and ISC must diligently develop the capacity to support
the Acquired Companies and the Business as soon as practicable after the Closing
Date, the parties shall cooperate during the period from the date hereof to the
Closing Date to identify those areas which will require support from Parent,
Seller, NMT-US and their respective Affiliates (other than the Acquired
Companies) following the Closing and to enter into one or more service
agreements providing for the rendering of such support by Parent, Seller, NMT-US
and their Affiliates to Buyer and ISC such services to be performed at a
reasonable level and at no charge to the Buyer and ISC (including without
limitation, the Transaction Services Agreement referenced in Section
12.2(a)(ix)).
15.2 ADDITIONAL AGREEMENTS. In addition, the parties agree that:
----------------------
(a) Confidential Information.
(i) From and after the Closing Date, the Parent, Seller,
NMT-US shall hold in confidence, and use their best efforts to have all of their
Affiliates, assignees and successors, and their respective officers, directors
and personnel, to hold in confidence, all Confidential Information and shall not
disclose, publish or make use of the same without the consent of the Buyer,
except to the extent that such Confidential Information shall have become public
knowledge other than by breach of this Agreement by any of such bound parties or
to the extent required by law.
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(ii) Each of Parent, Seller and NMT-US agrees that damages are
an inadequate remedy for any breach of this provision and that Buyer and ISC
shall, whether or not it is pursuing any potential remedies at law, be entitled
to equitable relief in the form of preliminary and permanent injunctions without
posting of bond or other security upon any actual or threatened breach of this
non-solicitation and non-competition provision.
(b) Sharing of Data. Parent and Seller shall have the right for a
period of three (3) years following the Closing Date to have reasonable access
to such books, records and accounts, including financial and Tax information,
correspondence, production records, employment records and other similar
information as are transferred to Buyer pursuant to the terms of this Agreement
for the limited purposes of concluding its involvement in the Business prior to
the Closing Date and for complying with its obligations under applicable
securities, Tax, environmental, employment or other Laws. Buyer shall have the
right for a period of three (3) years following the Closing Date to have
reasonable access to those books, records and accounts, including financial and
Tax information, correspondence, production records, employment records and
other records which are retained by Parent, Seller or any of their respective
Affiliates, assignees or successors pursuant to the terms of this Agreement to
the extent that any of the foregoing relates to the Business transferred to, or
Liabilities assumed by, Buyer hereunder or is otherwise needed by Buyer in order
to comply with its obligations under applicable securities, Tax, environmental,
employment or other laws and regulations.
(c) Cooperation in Litigation. Each party hereto will fully
cooperate with the other in the defense or prosecution of any litigation or
proceeding already instituted or which may be instituted hereafter against or by
such party relating to the Assets or arising out of the conduct of the Business
prior to or after the Closing Date (other than litigation arising out the
transactions contemplated by this Agreement or any Related Agreement). The party
requesting such cooperation shall pay the out-of-pocket expenses (including
legal fees and disbursements) of the party providing such cooperation and of its
officers, directors, employees and agents reasonably incurred in connection with
providing such cooperation, but shall not be responsible to reimburse the party
providing such cooperation for such party's time spent in such cooperation or
the salaries or costs of fringe benefits or similar expenses paid by the party
providing such cooperation to its officers, directors, employees and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
16. GENERAL.
16.1 [INTENTIONALLY OMITTED]
16.2 PAYMENT OF EXPENSES. Except as specifically set forth elsewhere
-------------------
in this Agreement, expenses related to this Agreement and attendant
transactions, including the fees of brokers, counsel and accountants, shall be
borne by the party incurring such expenses. No transaction expenses have been or
shall be borne by any of the Acquired Companies.
16.3 MODIFICATIONS; WAIVERS. This Agreement may be modified and rights
----------------------
hereunder may be waived only by a writing executed and delivered on behalf of
the party against
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whom such modification or waiver is asserted. In no case shall any such
modification or waiver be effective without the written consent of Buyer.
16.4 ASSIGNABILITY. This Agreement and the rights and obligations
-------------
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their respective successors (including successors by operation of law),
assigns and legal representatives. This Agreement shall not be assignable by any
party hereto, except that each of Parent, Seller, NMT-US, Buyer and ISC may
assign their respective rights and obligations hereunder to one or more of its
Affiliates, provided that, the assignor shall guarantee the performance of such
assignees under this Agreement and further provided that if the Affiliate of
Buyer or ISC to which the Buyer or ISC assigns its rights and obligations under
this Agreement ceases to be an Affiliate of Buyer or ISC, Buyer or ISC, as the
case may be shall cause such former Affiliate to assign its rights and
obligations under this Agreement to Buyer or one of their Affiliates.
16.5 NO OTHER REPRESENTATIONS. Each of the parties acknowledges that
------------------------
in entering into this Agreement it has not relied on any representation,
warranty, agreement or statement not set out in this Agreement or in any of the
Related Agreements (or in any document, instrument or certificate contemplated
hereby or thereby), whether express or implied, and that (in the absence of
fraud) it will not have any right or remedy arising out of any such
representation, warranty, agreement or statement.
16.6 NOTICES. Any communication to be given hereunder by any parties
-------
to the other party shall be in writing and delivered by messenger, sent by
overnight courier, or transmitted by facsimile or electronic mail (with
confirmation of receipt by the intended party), to the address or designation of
such party set forth below or as changed by such party by notice given
hereunder. A communication transmitted by facsimile shall be deemed effective
when transmitted; a communication sent by overnight courier shall be deemed
effective two business days after being sent; and a communication delivered by
messenger shall be deemed effective when delivered.
if to Parent,
Seller, NMT-US: c/o NMT Medical, Inc.
27 Wormwood Street
Boston, Massachusetts 02110-1625
Attention: Thomas M. Tully, President
Facsimile: (617) 737-0924
E-mail: [email protected]
with a copy to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Steven D. Singer, Esq.
Facsimile: (617) 526-5000
E-mail: [email protected]
58
<PAGE>
to Buyer or ISC: c/o Integra Life Sciences Corporation
311 Enterprise Drive
Plainsboro, New Jersey 08536
Attention: Stuart M. Essig and
John B. Henneman, III
Facsimile: (609) 275-1082
E-mail: [email protected]
[email protected]
with a copy to: Latham & Watkins
Sears Tower, Suite 5800
Chicago, Illinois 60606
Attention: Michael D. Levin, Esq.
Facsimile: (312) 993-9767
E-mail: [email protected]
The foregoing is not intended to be exclusive; any written communication
actually received shall be effective when received.
16.7 CAPTIONS. The section captions used in this Agreement are for
--------
reference and cross-reference purposes only and shall not otherwise affect the
meaning or interpretation of this Agreement.
16.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original and all of which shall be deemed to
constitute the same Agreement.
16.9 KNOWLEDGE. Any statement in this Agreement qualified by the
---------
expression "so far as Parent, Seller, NMT-US and/or any of the Acquired
Companies are aware" or "to the knowledge of any of Parent, Seller, NMT-US or
the Acquired Companies" or "to the knowledge of Parent, Seller or NMT-US" or any
similar expressions shall be deemed to include the knowledge of the directors of
each of Parent, Seller, NMT-US and the Acquired Companies and, additionally,
each of those individuals identified in Schedule 16.9 attached hereto.
16.10 GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the Laws of the State of Delaware, without regard to the
conflict of laws principles thereof.
17. ENTIRE AGREEMENT. This Agreement (including the Exhibits, Schedules and
----------------
attachments hereto) constitutes the entire agreement between the parties hereto
and supersedes and cancels any prior agreements, representations, warranties, or
communications, whether oral or written, between the parties hereto relating to
the transactions contemplated hereby or the subject matter herein. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.
59
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be duly executed in its corporate name by a duly authorized officer thereof as
of the date first above written.
PARENT:
------
NMT MEDICAL, INC.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: President
SELLER:
------
NMT NEUROSCIENCES HOLDINGS (UK), LTD.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: Director
NMT-US:
------
NMT NEUROSCIENCES (US), INC.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: President
ACQUIRED COMPANIES:
------------------
NMT NEUROSCIENCES (UK), LTD.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: Director
S-1
<PAGE>
SPEMBLY MEDICAL LTD.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: Director
SPEMBLY CRYOSURGERY LTD.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: Director
SWEDEMED AB
By: /s/ David Chazanovitz
----------------------
Name: David Chazanovitz
Title: Chairman of the Board
BUYER:
-----
INTEGRA NEUROSCIENCES HOLDINGS (UK) LTD.
By: /s/ Stuart M. Essig
--------------------
Name: Stuart M. Essig
Title: Director
ISC:
---
INTEGRA SELECTOR CORPORATION
By: /s/ Stuart M. Essig
--------------------
Name: Stuart M. Essig
Title: President
S-2
<PAGE>
SCHEDULE OF PRODUCTS
--------------------
Product Listing - Selector, Cryo and TENS
- -----------------------------------------
SELECTOR
- --------
Selector Integra Console &
- --------------------------
Selector Integra Service Module
- -------------------------------
24 KHZ Straight Handpiece
24 KHZ Angled Handpiece
24 KHZ Laparoscopic Handpiece
24 KHZ Neuro Short Handpiece
24 KHZ Neuro Long Handpiece
35 KHZ Straight Handpiece
35 KHZ Neuro Handpiece
24 KHZ MicroSurgical Handpiece
Selector Integra Console (MRI)
- ------------------------------
24 KHZ Neuro Short Handpiece (MRI)
24 KHZ Neuro Long Handpiece (MRI)
35 KHZ Neuro Handpiece (MRI)
24 KHZ MicroSurgical Handpiece (MRI)
CRYO
- ----
Spembly 140 Console
- -------------------
Series 40 R7 Probe
Series 40 27-H-7L Probe
Series 40 4-FAB-10L Probe
Series 40 1-V-1 Probe
Series 40 2-S-2 Probe
Series 40 2-C-2 Probe
Series 40 11-0-11 Probe
Series 40 5-H-10 Probe
Series 40 5-N-17 Probe
Series 40 1-K-2 Probe
Series 40 4-H-3 Probe
Series 40 2-H-2 Probe
Series 40 4-FAP-10 Probe
Series 40 3-T-7C Probe
Schedule of Products
Page 1
<PAGE>
Spembly 142 Console
- -------------------
Series 42 4-4-3 Probe
Series 42 11-0-11 Probe
Series 42 4-H-5 Probe
Series 42 5-H-10 Probe
Series 42 3-R-2 Probe
Series 42 27-H-7L Probe
Series 42 4-FAB-10L Probe
SL 2000 UK Console &
- --------------------
SL 2000 (Westco) Console
- ------------------------
Series 44 1-H-3 Probe
Series 40 1-H-3 E Probe
Series 44 2-T-10 Probe
PCG 9 R
- -------
PCG 12 R
- --------
PCG 12 D Europe
- ---------------
Keeler ACU 22XT Console
- -----------------------
Keeler CTU (Cylinder Top Unit)
- ------------------------------
Series 22 89-V-1 Probe
Series 22 3-ESF-2 Probe
Series 22 3-E-2 Probe
Series 22 3-R-2 Probe
Series 22 3-RM-2 Probe
Series 22 4-G-3 Probe
Series 22 3-T-2 Probe
Series 22 4-FAP-10 Probe
Series 22 2-5-2 Probe
Series 22 2-C-2 Probe
Series 22 3-B-2 Probe
Series 22 3-RO-2 Probe
Series 22 2-CP-2 Probe
Series 24 4-FAP-8 Probe
Keeler Cryomaster
- -----------------
Series 18 89-V-1 Probe
Series 18 3-R-2 Probe
Series 18 3-EX-2 Probe
Series 18 3-B-2 Probe
Schedule of Products
Page 2
<PAGE>
Series 18 2-C-2 Probe
Series 18 4-G-3 Probe
Series 18 4-FAP-10 Probe
Series 18 3-ESF-2 Probe
Series 18 3-T-2 Probe
Series 18 4-FAP-8 Probe
Series 18 2-CP-2 Probe
Series 18 3-RM-2 Probe
Series 18 3-RO-2 Probe
DORC Console
- ------------
DORC 89-V-1 Probe
DORC 2-CP-2 Probe
DORC 3-RO-2 Probe
DORC 2-C-2 Probe
DORC 3-E-2 Probe
DORC 3-B-2 Probe
DORC 3-R-2 Probe
DORC 4-FAP-10 Probe
DORC 3-T-2 Probe
DORC 4-G-3 Probe
DORC 3-EX-2 Probe
DORC 3-ESF-2 Probe
DORC 2-S-2 Probe
DORC 3-RM-2 Probe
Cryomedics 5000 Console
- -----------------------
Series 50 3-R-2 Probe
Series 50 4-G-3 Probe
Series 50 2-S-2 Probe
Series 50 2-C-2 Probe
Series 50 89-V-1 Probe
Series 50 1-C-1 Probe
Series 50 1-S-1 Probe
LCS 2000 Console &
- ------------------
LCS 3000 Console
- ----------------
3mm Liver Probe - Orange, Yellow, Green, Blue, White
5mm Liver Probe - Orange, Yellow, Green, Blue, White
10mm Liver Probe - Orange, Yellow, Green, Blue, White
30mm Liver Probe - Orange, Yellow, Green, Blue, White
40mm Liver Probe - Orange, Yellow, Green, Blue, White
Schedule of Products
Page 3
<PAGE>
50mm Liver Probe - Orange, Yellow, Green, Blue, White
60mm Liver Probe - Orange, Yellow, Green, Blue, White
3mm Prostate Probe - Orange, Yellow, Green, Blue, White
HCS 2000 Console
- ----------------
Cryoneedle 3 Channel &
- ----------------------
Cryoneedle 3 Channel without arm &
- ----------------------------------
Cryoneedle 5 Channel
- --------------------
3mm Liver Probe
5mm Liver Probe
10mm Liver Probe
40mm Liver Probe
2mm Laparoscopic Probe
2mm Long Laparoscopic Probe
3mm Laparoscopic Probe
3mm Laparascopie Probe
Prostate Probe
TENS
- ----
Pulsar S Single Channel
- -----------------------
Pulsar D Dual Channel
- ---------------------
Pulsar Obstetric
- ----------------
Schedule of Products
Page 4
<PAGE>
EXHIBIT A
---------
ASSETS
1. Shares of the Acquired Companies
2. Intellectual Property of the Acquired Companies, including that set forth
on Schedule 3.9(a)
---------------
3. Permits and Licenses held by the Acquired Companies
4. The leasehold interest described on Schedule 3.15(b)(i)
-------------------
6. Contracts set forth on Schedule 3.8.
------------
7. All inventory of Products and related parts, equipment and materials
located in the United States (ownership and title to which shall be
transferred to the Acquired Companies prior to the Closing).
A-1
<PAGE>
EXHIBIT A (US)
--------------
US-BASED ASSETS
1. All customer databases, leadsheets, databases of actual or potential
customers, lists of referring physicians, nurses and other medical
professionals located in or related to Persons located in the United
States, which relate to the Products or the Business.
A(US)-1
<PAGE>
EXHIBIT B
---------
EXCLUDED ASSETS
1. Accounts receivable of NMT-US related to sales of Products in the United
States prior to Closing.
2. Elekta Receivables.
B-1
<PAGE>
EXHIBIT C
---------
REFERENCE DATE BALANCE SHEET
C-1
<PAGE>
NMT Neurosciences - Andover U.K. Operations and Related Inventory
Reference Date Balance Sheet - December 31, 1999
Purchased By Retained By
Integra NMT Medical
------------- -----------
ASSETS
Current Assets
Cash & Cash Equivalents $ 0 $ 645,000
Accounts Receivable 1,417,000 0
Interdivisional receivables 0 2,289,000
Corporate A/R 0 0
Elekta A/R 0 271,000
Inventory
Selector, Cryo & TNS (in UK) 715,000 0
Selector (in US - excluding transfer price) 347,000 0
----------- ----------
Total Inventory, net 1,062,000 0
Prepaid Expenses and Other Current Assets 82,000 0
----------- ----------
Total Current Assets 2,561,000 3,205,000
PP&E
Land and Buildings 0 0
Laboratory and Computer Equipment 463,000 0
Leasehold Improvements 947,000 0
Equipment Under Capital Lease 0 0
Office Furniture and Equipment 1,108,000 0
Accumulated Depreciation (1,244,000) 0
----------- ----------
PP&E, net 1,274,000 0
Goodwill 192,000 0
Other Long-Term Assets 550,000 0
----------- ----------
TOTAL ASSETS $ 4,577,000 $3,205,000
=========== ==========
LIABILITIES
Current Liabilities
Accounts Payable $ 484,000 $ 0
Interdivisional Payables 0 237,000
Corporate A/P 0 63,000
Elekta A/P 0 566,000
Accrued Expenses 620,000 0
Taxes (State/Regional/VAT/Corporation) 174,000 0
Current Portion of Cap. Leases 42,000 0
Current Portion of Senior Debt (Barklays) 0 135,000
----------- ----------
Total Current Liabilities 1,320,000 1,001,000
Capital Lease Obligation 50,000 0
Senior Debt (Barklays) 0 112,000
Deferred Taxes 185,000 0
----------- ----------
TOTAL LIABILITIES $ 1,555,000 $1,113,000
=========== ==========
- --------------------------------------------------------------------------------
Net Assets $ 3,022,000 $2,092,000
- --------------------------------------------------------------------------------
C-2
<PAGE>
EXHIBIT D
---------
EXCLUDED LIABILITIES
1. Any Liability attributable to a violation of any Environmental Law by the
Business, any Acquired Company or Acquired Company's Affiliate prior to the
Closing or the Release of any Hazardous Materials prior to the Closing
(whether or not by any Acquired Company or any Acquired Company's
Affiliate).
2. Liabilities related to Elekta Agreement or any claims or disputes
thereunder (including, without limitation, the Elekta Payables).
3. Liabilities related to the continued employment of Steven Sinyard that
exceed the Continued Employee Payment.
4. Liabilities related to any operations, leases or employees located outside
of the Andover Facility, including without limitation, liabilities related
to the operations in Hong Kong.
5. Liabilities (including, without limitation, product liability claims)
related to any products, devices, parts or other materials manufactured,
created, assembled, distributed, marketed, promoted or sold by Parent,
Seller, NMT-US, any of the Acquired Companies or any of their respective
Affiliates prior to the Closing Date, whether or not such products,
devices, parts or other materials constitute Products hereunder, including,
without limitation, any Liabilities related to the Modus line of products.
6. Liabilities related to Movex software system.
D-1
<PAGE>
EXHIBIT E-1
-----------
FORM OF BILL OF SALE
(Attached)
E-1
<PAGE>
EXHIBIT E-1
-----------
BILL OF SALE
------------
This Bill of Sale dated March __, 2000 is executed and delivered by NMT
Medical, Inc., a Delaware corporation ("Parent"), and NMT Neurosciences (US),
Inc., a Delaware corporation ("NMT-US"), to Integra Selector Corporation, a
Delaware corporation ("ISC"). All capitalized words and terms used in this Bill
of Sale and not defined herein shall have the respective meanings ascribed to
them in the Purchase Agreement dated as of March __, 2000 among Parent, NMT-US,
ISC and other parties named therein (the "Purchase Agreement").
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement, Parent and NMT-US have agreed
to sell, transfer, convey, assign and deliver to ISC the US-Based Assets.
NOW, THEREFORE, for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Parent and NMT-US hereby agrees as
follows:
1. Transfer of US-Based Assets. Parent and NMT-US hereby sell, transfer,
---------------------------
convey, assign and deliver to ISC, its successors and assigns, to have and to
hold forever, all of the US-Based Assets. Notwithstanding the foregoing, the
US-Based Assets to be transferred to the ISC under this Bill of Sale shall not
include those assets listed on Exhibit B attached to the Purchase Agreement,
which is incorporated herein by reference.
2. Further Assurances. Each of Parent and NMT-US hereby covenants and
------------------
agrees that it will, at the request of ISC and without further consideration,
execute and deliver, and will cause its employees to execute and deliver, such
other instruments of sale, transfer, conveyance and assignment, and take such
other action as may reasonably be necessary to more effectively sell, transfer,
convey, assign and deliver to, and vest in, ISC, its successors and assigns,
good, clear, record and marketable title to the US-Based Assets hereby sold,
transferred, conveyed, assigned and delivered, or intended so to be, and to put
ISC in actual possession and operating control thereof, to assist ISC in
exercising all rights with respect thereto and to carry out the purpose and
intent of the Purchase Agreement.
3. Power of Attorney. Except as expressly provided in the Agreement,
-----------------
each of Parent and NMT-US does hereby irrevocably constitute and appoint ISC,
its successors and assigns, its true and lawful attorney, will full power of
substitution, in its name or otherwise, and on behalf of Parent and NMT-US, or
for its own use, to claim, demand, collect and receive at any time and from time
to time any and all assets, properties, claims, accounts and other rights,
tangible or intangible, hereby sold, transferred, conveyed, assigned and
delivered, or intended so to be, and to prosecute the same at law or in equity
and, upon discharge thereof, to complete, execute and deliver any and all
necessary instruments of satisfaction and release.
4. Assignment. This Bill of Sale and the rights and obligations hereunder
----------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors (including successors by operation of law), assigns and
legal representatives. This Bill or Sale
<PAGE>
shall not be assignable by any party hereto, except that each of Parent and NMT-
US may assign their respective rights and obligations hereunder to one or more
of its Affiliates, provided that, the assignor shall guarantee the performance
of such assignees under this Bill of Sale.
5. Counterparts. This Bill of Sale may be executed in counterparts, each of
------------
which shall be deemed to be an original and all of which shall be deemed to
constitute the same Agreement.
6. Governing Law. This Bill of Sale shall be governed by and construed in
-------------
accordance with the Laws of the State of Delaware, without regard to the
conflict of laws principles thereof.
7. Incorporation of Preamble and Recitals. The preamble and recitals to this
--------------------------------------
Agreement are hereby incorporated herein and made part hereof.
8. Disclosure to Third Parties. Notwithstanding any confidentiality, non-
---------------------------
disclosure or similar provisions contained in the Purchase Agreement, this Bill
of Sale may be disclosed ISC to any Person who claims or attempts to claim that
ISC does not possess full right, title and interest in and to the US-Based
Assets transferred hereby.
9. Relation to Purchase Agreement. This Bill of Sale shall be interpreted and
------------------------------
construed in a manner consistent with the provisions of the Purchase Agreement;
provided, however, that in the event of any inconsistency between this Bill of
Sale and the Purchase Agreement, the terms of the Purchase Agreement shall
control.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Parent and NMT-US have caused this instrument to be
duly executed under seal as of and on the date first above written.
NMT MEDICAL, INC.
By:______________________________
Title:___________________________
NMT NEUROSCIENCES (US), INC.
By:______________________________
Title:___________________________
ACCEPTED:
- --------
INTEGRA SELECTOR CORPORATION
By:________________________
Title:_____________________
<PAGE>
EXHIBIT E-2
-----------
FORM OF EXCLUDED LIABILITIES ASSUMPTION AGREEMENT
(Attached)
E-2
<PAGE>
EXHIBIT E-2
-----------
EXCLUDED LIABILITY ASSUMPTION AGREEMENT
---------------------------------------
This Excluded Liability Assumption Agreement (this "Agreement"), dated
March __, 2000, is made by each of NMT MEDICAL, INC., a Delaware corporation
formerly known as Nitinol Medical Technologies, Inc. ("Parent"), NMT
NEUROSCIENCES (US), INC., a Delaware corporation and wholly-owned subsidiary of
Parent ("NMT-US"), NMT NEUROSCIENCES HOLDINGS (UK) LTD., a corporation organized
under the laws of England and an indirect wholly-owned subsidiary of Parent
("Seller"), and NMT NEUROSCIENCES (UK) LTD., a corporation organized under the
laws of England and Wales and a wholly-owned subsidiary of Seller
("Neurosciences"), in favor of SPEMBLY MEDICAL LTD., a corporation organized
under the laws of England and Wales and a wholly-owned subsidiary of
Neurosciences ("Spembly"), SPEMBLY CRYOSURGERY LTD, a corporation organized
under the laws of England and Wales and a wholly-owned subsidiary of Spembly
("Spembly-Cryosurgery"), SWEDEMED AB, a corporation organized under the laws of
Sweden and a wholly-owned subsidiary of Neurosciences ("Swedemed" and, together
with Neurosciences, Spembly and Spembly-Cryosurgery, collectively, the "Acquired
Companies" and each, individually, an "Acquired Company"), INTEGRA NEUROSCIENCES
HOLDINGS (UK) LTD., a corporation organized under the laws of England and Wales
("Buyer"), and INTEGRA SELECTOR CORPORATION, a Delaware corporation ("ISC").
All capitalized words and terms used in this Excluded Liability Assumption
Agreement and not defined herein shall have the respective meanings ascribed to
them in the Purchase Agreement, dated as of March __, 2000, among the
aforementioned parties (the "Purchase Agreement").
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement, the Seller has agreed to sell,
transfer, convey, assign and deliver to the Buyer all of the Shares of
Neurosciences, together with certain assets owned by NMT-US, as a means of
transferring the Business to Buyer;
WHEREAS, notwithstanding the fact that the transaction contemplated by the
Agreement is structured as a purchase of the Shares and the US-Based Assets,
Buyer and ISC shall acquire at the Closing only those Liabilities specified in
Section 2.5(a) of the Purchase Agreement;
WHEREAS, it is a condition precedent to the closing of the transactions
contemplated by the Purchase Agreement that, from and after the Closing, Seller,
NMT-US and Parent shall assume retain the Excluded Liabilities; and
WHEREAS, Parent, Seller and NMT-US hereby agree to execute and deliver this
Agreement in favor of Buyer, ISC and the Acquired Companies to explicitly assume
and retain the Excluded Liabilities.
<PAGE>
NOW, THEREFORE, for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the Parent, Seller and
NMT-US hereby agrees as follows:
1. Assumption and Retention. Each of the Parent, Seller and NMT-US,
------------------------
jointly and severally, hereby assumes and retains the Excluded Liabilities,
including, without limitation, those set forth on Exhibit D to the Purchase
---------
Agreement.
2. Discharge and Performance. Seller, NMT-US and Parent shall discharge
-------------------------
and perform, or cause to be discharged and performed, all obligations related to
the Excluded Liabilities, except to the extent that Parent in good faith
disputes the amount or existence thereof.
3. No Liability of Buyer, ISC or the Acquired Companies. Seller, NMT-US
----------------------------------------------------
and Parent hereby agree and acknowledge that none of Buyer, ISC, any of the
Acquired Companies or any of their respective Affiliates shall have any
responsibility or Liability to Seller, Parent or any other Person for any
Excluded Liabilities.
4. No Assumption of Acquired Liabilities. Notwithstanding the foregoing,
-------------------------------------
none of Seller, Parent or NMT-US shall assume or retain any of the Acquired
Liabilities under Section 2.5(a) of the Purchase Agreement.
5. Indemnification. Each of the Parent, the Seller and NMT-US agrees to
---------------
indemnify and hold harmless the Buyer, ISC and the Acquired Companies from and
against all Damages with respect to the failure of the Parent, the Seller or
NMT-US to pay, discharge or otherwise satisfy or perform, when due, the
liabilities, obligations and commitments hereby assumed and retained.
6. Assignment. This Agreement and the rights and obligations hereunder
----------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors (including successors by operation of law), assigns and
legal representatives. This Agreement shall not be assignable by any party
hereto, except that each of Parent and Seller, NMT-US may assign their
respective rights and obligations hereunder to one or more of its Affiliates,
provided that, the assignor shall guarantee the performance of such assignees
under this Agreement.
7. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed to be an original and all of which shall be deemed to
constitute the same Agreement.
8. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the Laws of the State of Delaware, without regard to the
conflict of laws principles thereof.
9. Incorporation of Preamble and Recitals. The preamble and recitals to
--------------------------------------
this Agreement are hereby incorporated herein and made part hereof.
Further Assurances. From time to time after the date hereof and without further
- ------------------
consideration, Parent, Seller and NMT-US shall execute and deliver, or cause to
be executed and delivered, such
<PAGE>
further instruments of assumption and retention, and take such other actions as
may reasonably be requested by Buyer, ISC or any of the Acquired Companies, in
order to more effectively and fully consummate the assumption and retention of
the Excluded Liabilities hereunder.
10. Disclosure to Third Parties. Notwithstanding any confidentiality,
---------------------------
non-disclosure or similar provisions contained in the Purchase Agreement, this
Agreement may be disclosed by (a) Buyer, ISC or any of the Acquired Companies to
any Person who claims or attempts to claim that Buyer, ISC or any of the
Acquired Companies shall pay, perform or discharge any of the Excluded
Liabilities, or (b) by Parent, Seller or NMT-US to any Person who claims or
attempts to claim that Parent, Seller or NMT-US shall pay, perform or discharge
any of the Acquired Liabilities.
11. Relation to Purchase Agreement. This Agreement shall be interpreted
------------------------------
and construed in a manner consistent with the provisions of the Purchase
Agreement; provided, however, that in the event of any inconsistency between
this Agreement and the Purchase Agreement, the terms of the Purchase Agreement
shall control.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Seller, the Parent and NMT-US have caused this
instrument to be duly executed under seal as of and on the date first above
written.
NMT NEUROSCIENCES HOLDINGS (UK), LTD.
By:__________________________________
Title:_______________________________
NMT MEDICAL, INC.
By:__________________________________
Title:_______________________________
NMT NEUROSCIENCES (US), INC.
By:__________________________________
Title:_______________________________
ACCEPTED:
- --------
INTEGRA NEUROSCIENCES
HOLDINGS (UK) LTD., on behalf of itself and
its subsidiaries
By:__________________________________
Title:_______________________________
INTEGRA SELECTOR CORPORATION
By:__________________________________
Title:_______________________________
<PAGE>
EXHIBIT F
---------
FORM OF PRESS RELEASES
F-1
<PAGE>
NEWS BULLETIN
FROM: RE: NMT MEDICAL
27 WORMWOOD STREET
The Financial Relations Board BOSTON, MA 02210-1625
- ----------------------------- (Nasdaq/NMS:NMTI)
BSMG WORLDWIDE
- --------------------------------------------------------------------------------
FOR FURTHER INFORMATION:
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
- ----------------- --------------------------------
Thomas M. Tully General Info: Paula Schwartz
President & CEO Analyst Info: Brian Gill
(617) 737-0930 Media Info: Deanne Eagle
(212) 661-8030
FOR IMMEDIATE RELEASE
- ---------------------
March 21, 2000
NMT MEDICAL, INC. ANNOUNCES PARTIAL SALE OF ITS NEUROSCIENCES BUSINESS TO
-------------------------------------------------------------------------
INTEGRA LIFESCIENCES HOLDING CORPORATION
----------------------------------------
Company to Focus on Higher Growth, High Margin Cardiovascular Businesses
Boston, MA, March 21, 2000 -- NMT Medical, Inc. (Nasdaq/NMS: NMTI) today
announced that it has entered into a definitive agreement to sell the
Selector(R) Ultrasonic Aspirator, Ruggles(TM) Surgical Instruments and
cryosurgery product lines of its NMT Neurosciences division, including certain
assets and liabilities, to Integra LifeSciences Holdings Corporation (Nasdaq:
IART) for $12 million in cash. NMT Medical will use the proceeds of the
transaction for debt reduction and for general working capital requirements.
Commenting on today's news, Thomas M. Tully, President and Chief Executive
Officer of NMT Medical, said, "We are very pleased with this transaction, which
allows us to focus more of our management and financial resources on the higher
growth and profit potential of our core cardiovascular businesses, particularly
the CardioSEAL(R) Septal Occluder - a unique cardiac implant designed to close
holes in the heart. The three U.S. Food and Drug Administration (FDA) approvals
we received for the CardioSEAL under Humanitarian Use Designation regulations
last fall and earlier this year represent a major opportunity for NMT Medical.
The response of interventional cardiologists to this innovative new procedure
has been very encouraging with more than 40 interventional cardiology centers
already approved for the use of the device and 85 more in various stages of
gaining Institutional Review Board (IRB) approval. In the meantime, we are
continuing to expand our direct sales force in the U.S. to meet the demand for
product training and service. We are also preparing for the international
market introduction of our unique Recovery(TM) removable vena cava filter with
our distribution partner, CR Bard. This innovative new device is the first-ever
implantable vena cava filter that can be removed with a simple catheter removal
procedure early after implant -- or, if desired, can be left in permanently."
<PAGE>
NMT Medical Inc.
Announces Partial Sale of its Neurosciences Businesses to Integra Holding
Corporation
Page 2
Mr. Tully continued, "As a result of this transaction, NMT Neurosciences should
benefit from a sharper focus away from capital equipment and onto the sales of
its remaining implantable products and disposables, while reducing overall
expenses. We believe that our cerebral spinal fluid (CSF) pressure management
product line, including the advanced Orbis Sigma II hydrocephalus shunt, is
unsurpassed in the industry. Our direct sales organization in the U.S. and
Europe will now be able to devote more sales time to these products to further
build the franchise."
Company to Report Full Year 1999 Results on or About April 14, 2000
Management noted that because the sale will be accounted for in NMT Medical's
fourth quarter 1999 results, the Company will file for an extension and expects
to submit its Form 10K for the year ended December 31, 1999 with the Securities
and Exchange Commission on or about April 14, 2000. This extension will give
the Company the time to obtain all of the information necessary to properly
account for the transaction.
Integra LifeSciences Holdings Corporation develops, manufactures and markets
medical devices, implants and biomaterials primarily used in the treatment of
spinal and cranial disorders, soft-tissue repair and orthopedics. Its corporate
headquarters are located in Plainsboro, New Jersey with facilities in San Diego,
California, Exton, Pennsylvania, Andover, England and Anasco, Puerto Rico.
NMT Medical designs, develops and markets innovative medical devices that
utilize advanced technologies and are delivered by minimally invasive
procedures. The Company's products are designed to offer alternative approaches
to existing complex treatments, thereby reducing patient trauma, shortening
procedure, hospitalization and recovery times, and lowering overall treatment
costs. The Company's medical devices include self-expanding stents, vena cava
filters and septal repair devices. The NMT Neurosciences division serves the
needs of neurosurgeons with a range of implantable and disposable products,
including cerebral spinal fluid shunts, external drainage products, and the
Spetzler(TM) Titanium Aneurysm Clip.
This press release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties or other factors which
may cause actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed under
the heading "Certain Factors That May Affect Future Results" included in the
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 and subsequent filings with the Securities and Exchange
Commission.
# # #
To receive NMT Medical's latest news release and other corporate documents
via FAX -- at no cost -- please dial 1-800-PRO-INFO. Enter the
Company's symbol NMTI.
Or visit NMT's website at www.nmtmedical.com
<PAGE>
NEWS RELEASE
March 20, 2000
Contact:
John B. Henneman, III
Senior Vice President
Chief Administrative Officer
Integra LifeSciences Holdings Corporation
609-936-2481
[email protected]
Integra LifeSciences Announces Agreement to Acquire
The Selector(R) Ultrasonic Aspirator, Ruggles(TM) Surgical
Instrumentation and Spembly Medical Cryosurgery Product Lines
of NMT Medical, Inc.
PLAINSBORO, N.J., March 21 /PRNewswire/ -- Integra LifeSciences Holdings
Corporation (Nasdaq: IART) today announced that it has agreed to acquire from
NMT Medical, Inc. (Nasdaq: NMTI) the Selector(R) Ultrasonic Aspirator,
Ruggles(TM) Surgical Instrumentation and Spembly Medical Cryosurgery product
lines, including certain assets and liabilities, for an acquisition price of
$12.0 million.
In connection with the acquisition, Integra will change the name of its
neurosurgical device business from Integra NeuroCare to Integra NeuroSciences.
Integra NeuroSciences designs, manufactures and sells implants, instruments and
monitors used in neurosurgery and intensive care units, primarily for the
treatment of neurological trauma and surgery. Revenue of the acquired product
lines during 1999 was approximately $12.1 million.
The combination of this purchase and the acquisition of Clinical Neuro Systems
earlier this year expands Integra NeuroSciences business in the United States
and around the world. Together with its seven-person medical education unit,
Integra NeuroSciences' direct selling effort will expand to 45 U.S. field
personnel focused on neurotrauma and neurosurgery. The Company will recruit a
direct sales force for selling directly in the United Kingdom and Ireland.
Integra NeuroSciences will continue to sell its products in over 60 countries
worldwide through a combined network of approximately 100 international
distributors.
The $12.0 million acquisition price comes from cash on hand. Earlier this year,
Integra announced that it had agreed to sell $5.4 million of preferred stock to
investment affiliates of Soros Private Equity Partners LLC. That investment is
expected to close by the end of March.
Stuart M. Essig, Integra President and Chief Executive Officer, commented, "This
acquisition establishes Integra as an industry leader in neurosurgery and
neurotrauma. It allows us to continue to broaden and strengthen Integra's well-
trained and experienced sales group, and adds to Integra's revenues and cash
flow. These new products, along with our existing neurosurgical
<PAGE>
devices, will be sold through a direct sales force in the United States, United
Kingdom, and Ireland."
The assets to be acquired include a manufacturing, packaging and distribution
facility located in Andover, England.
Integra LifeSciences Holdings Corporation has its corporate headquarters in
Plainsboro, NJ. Manufacturing and research facilities are also located in San
Diego, CA, Anasco, Puerto Rico, and Exton, PA. The Company has approximately 475
full-time employees. Please feel free to visit the Company's Website at
(http://www.integra-LS.com).
This news release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve risks and uncertainties that could cause actual results to
differ from predicted or pro-forma results. Achieving the anticipated benefits
of business acquisitions will depend in part upon whether the integration of the
companies' businesses is accomplished in an efficient manner, and there can be
no assurance that this will occur. Further forward- looking factors include, but
are not limited to, new product development, governmental approvals, market
potential and resulting sales as well as potential therapeutic applications, and
additional acquisitions. In addition, the economic, competitive, governmental,
technological and other factors identified in Integra's filings with the
Securities and Exchange Commission could affect actual results.
<PAGE>
Integra NeuroSciences
---------------------
Fact Sheet
----------
Integra NeuroSciences is the neurosurgery division of Integra LifeSciences
Holdings Corporation. Integra NeuroSciences sells direct in the United States
through 38 direct sales representatives and seven clinical education specialists
and approximately 100 international distributors who cover over 60 countries
worldwide.
Integra NeuroSciences has consistently brought innovative technologies to
market. Integra NeuroSciences products are as follows:
<TABLE>
<CAPTION>
Products Use Brand
<S> <C> <C>
Intracranial For continuous pressure Camino(R); Clinical Neuro
monitoring and and temperature monitoring Systems(TM); Ventrix(R)
Drainage of the brain following injury intracranial pressure
monitoring and drainage
systems
Ultrasonic For removal of tumors Selector(R) Ultrasonic
aspiration Aspirator
Neurosurgical Specifically designed for Heyer-Schulte(R);
shunts the maintenance of the Novus(R); Sundt(R);
chronic condition, Spetzler(R)
hydrocephalus, i.e. excess shunting systems
pressure in the brain,as well
as hemodynamic shunting
Neuroendoscopy For minimally invasive Neuro Navigational(R)
surgical access to the brain Flexible endoscopes for
neurosurgery
Neurosurgical Specialized surgical Redmond(TM); Ruggles(TM)
instruments instruments for neurosurgeons Neurosurgical and spinal
instruments
Neurosurgical Rapid hemostasis in Helitene(R)(1)
hemostasis neurosurgical and spinal Microfibrillar
surgery Hemostat
Dural grafts For repair of damage to the DuraGen(TM) Dural
dura mater, the membrane that Graft Matrix
encases the brain and spinal
column
</TABLE>
Integra NeuroSciences products are manufactured around the globe - San Diego,
California produces Camino(R), Ventrix(R), and Neuro Navigational(TM) products;
Andover, England produces the Selector(R) ultrasonic aspirators and the
cryosurgery products; Exton, Pennsylvania produces the Clinical Neuro
Systems(TM) products; Plainsboro, New Jersey produces DuraGen(TM) and
Helitene(R) products; the Anasco, Puerto Rico facility produces Heyer-
Schulte(R) and Sundt(R) shunting products.
(1) Not approved for neurological use in the United States. SOURCE Integra
LifeSciences Holdings Corporation
CONTACT: John B. Henneman, III, Senior Vice President and Chief Administrative
Officer of Integra LifeSciences Holdings, 609-936-2481, or jhenneman@integra-
ls.com/
<PAGE>
EXHIBIT G
---------
FORM OF UK COUNSEL TO OPINION
G-1
<PAGE>
EXHIBIT G
---------
[To be on Collyer-Bristow letterhead]
To: Integra Lifescience Holding Corp.
Dear Sirs:
NMT NEUROSCIENCES HOLDINGS (UK) LIMITED
MT MEDICAL INC.
We have acted as English legal advisers to NMT Neurosciences Holdings (UK)
Limited (the "Company") in connection with the same by the Company of its entire
shareholding in NMT Neurosciences (UK) Limited (the "Transaction") pursuant to
the terms of an agreement dated 2000 between, inter alia, the
Company and Integra Neurosciences Holdings (UK) Limited (the "Agreement").
Expressions defined in the Agreement have the same meanings where used in this
opinion, save as otherwise specified.
Documents examined
We have examined:-
(a) a copy of the Agreement as executed;
(b) certified copy resolutions of the board of directors (and/or a committee
thereof) of the Company relating (inter alia) to the Agreement;
(c) a certified copy of the Memorandum and Articles of Association of the
Company;
a resolution of the shareholders of the Company approving the Transaction
and authorising the directors of the Company to enter into the Agreement;
(d) a resolution of the shareholders of the Company approving the Transaction
and authorising the directors of the Company to enter into the Agreement;
(e) a certificate from an officer of the Company dated 2000
stating that no winding up resolution has been passed and that the Company
has received no notice of the appointment of a receiver or administrator or
of any petition being presented.
<PAGE>
Searches carried out
We arranged for a search to be carried out against the Company on 2000
at the Companies registry which did not reveal the existence of any order or
resolution to wind up the Company or of the appointment of any receiver or
administrator. Notice of an order, resolution or appointment does not appear
immediately on the microfiche and a company search will not in any event reveal
the existence of a petition to wind up or appoint an administrator. We have
received the Officer's Certificate stating that no winding-up resolution has
been passed and that the Company has received no notice of the appointment of a
receiver or administrator or of any petition being presented. We made telephone
inquiry of the High Court in London on 2000 and we were informed that
according to the Court's computer records no such petition had been presented or
order or appointment made.
Except as stated above, for the purpose of this opinion we have not examined any
contracts, instruments or other documents entered into by or affecting the
Company or any corporate records of the Company, nor have we carried out any due
diligence into the Company nor made any other enquiries concerning the Company.
We have not investigated the laws of any country other than England and we
assume that no foreign law affects any of the conclusions stated below. This
opinion is given only with respect to English law and is itself governed by
English law.
Assumptions made
In giving this opinion, we have assumed:-
(a) that all signatures are genuine, all seals have been properly affixed, all
copies conform to original documents, all originals are authentic and
complete and that all documents are valid and binding on all parties
thereto other than the Company;
(b) the accuracy of all representations as to fact made in the Agreement by the
Company.
Based upon, and in reliance upon, the foregoing and subject to any matters not
disclosed to us, and subject to the qualifications set out below we are of the
opinion that:-
(1) Status
The Company is a limited liability company, duly incorporated in England
and Wales and subsisting under English law and, so far as is discoverable
from public records in England and Wales, is not in liquidation.
(2) Powers and authority
The Company has all requisite corporate power to enter into and perform the
Agreement and the Transaction and has taken all necessary action to
authorise the entry into and performance of the Agreement and the
Transaction and matters contemplated thereby.
<PAGE>
(3) Legal validity
Each of the obligations expressed to be assumed by the Company under the
Agreement constitutes a legally valid, binding and enforceable obligation
of the Company.
(4) Non conflict
The entry into and performance of the Agreement by the Company and the
Transaction and matters thereby contemplated to be undertaken by the
Company do not and will not violate the Memorandum or Articles of
Associates of the Company.
(5) Consents
No authorisations, approvals, consents, licenses, exemptions, filings,
registrations or other requirement of governmental, judicial and public
bodies and authorities of or in England are required by law applicable to
companies generally to permit the entry into or performance of the
Agreement by the Company or in order to ensure the validity or
enforceability of the Agreement against the Company.
(6) Stamp duties
No stamp duty, registration duty or similar taxes or charges are required
to be paid by the Company in the United Kingdom as a result of the
execution or delivery of the Agreement or in order to ensure the validity
or enforceability of the Agreement.
(7) Enforcement of Judgments
A judgment of a competent state or federal court sitting in the United
States of America finally and conclusively establishing a debt will prima
facie be capable of enforcement in the English courts, but the defendant
may have defences open to it and enforcement may not be permitted if inter
alia; the judgment was obtained by fraud, was contrary to public policy
under English law, relates to foreign penal or revenue laws, is contrary to
natural justice, amounts to judgment on a matter previously determined by
an English court, is given in proceedings brought in breach of agreement
for settlement of disputes or if enforcement of the judgment is restricted
by the provisions of the protection of Trading Interests Act 1980.
Qualifications
This opinion is subject to the following qualifications:-
(a) The term "enforceable" as used above means that the obligations assumed by
the Company under the Agreement are of a type which the English courts
enforce. It does not mean that those obligations will necessarily be
enforced in all circumstances in accordance with their terms. In
particular:-
<PAGE>
(i) enforcement may be limited by any winding-up, administration,
bankruptcy, insolvency, reorganisation, moratorium or similar laws
affecting creditors' rights generally;
(ii) an English court will not necessarily grant any remedy the
availability of which is subject to equitable considerations or
which is otherwise in the discretion of the court. In particular,
orders for specific performance and injunctions are, in general,
discretionary remedies under English law and specific performance
is not available where damages are considered by the court to be an
adequate alternative remedy;
(iii) claims may become barred under the Limitation Acts or may be or
become subject to defences of set-off or counterclaim;
(iv) where obligations are to be performed in a jurisdiction outside
England, they may not be enforceable in England to the extent that
performance would be illegal or contrary to public policy under the
laws of that jurisdiction.
(b) An English court may stay proceedings if concurrent proceedings are being
brought elsewhere.
(c) The effectiveness of terms exculpating a party from a liability or duty
otherwise owed (including liability arising out of the non-payment of stamp
duty) is limited by law.
(d) The Agreement may be amended orally by the parties thereto notwithstanding
provisions therein to the contrary.
(e) We have not been involved in the drafting, preparation or negotiation of
the Agreement and accordingly express no opinion as to the sufficiency or
effectiveness of the Agreement to achieve the purposes contemplated by the
parties thereto.
(f) This opinion does not extend to the Competition Act 1998 or the Fair
Trading Act 1973 or any other competition legislation applicable in the UK
and we express no opinion as to any notification or registration
requirement thereunder or as to validity or enforceability thereunder.
This opinion is given for the sole benefit of the person(s) to whom it is
addressed and is not to be relied upon by or communicated to any other person or
for any other purpose, nor is it to be quoted or made public in any way without
our prior written consent.
Yours faithfully,
Collyer Bristow
<PAGE>
EXHIBIT H
---------
FORM OF TRANSITION SERVICES AGREEMENT
H-1
<PAGE>
EXHIBIT H
---------
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement (the "Agreement"), dated as of March
___, 2000, is entered into by and among NMT MEDICAL INC., a Delaware corporation
formerly known as Nitinol Medical Technologies, Inc. ("Parent"), on its own
behalf and on behalf of its Affiliates (as defined herein), NMT NEUROSCIENCES
(UK) LTD., a corporation organized under the laws of England and Wales
("Neurosciences"), SPEMBLY MEDICAL LTD., a corporation organized under the laws
of England and Wales and a wholly-owned subsidiary of Neurosciences ("Spembly"),
SPEMBLY CRYOSURGERY LTD, a corporation organized under the laws of England and
Wales and a wholly-owned subsidiary of Spembly ("Spembly-Cryosurgery"), SWEDEMED
AB, a corporation organized under the laws of Sweden and a wholly-owned
subsidiary of Neurosciences ("Swedemed" and, together with Neurosciences,
Spembly and Spembly-Cryosurgery, collectively, the "Acquired Companies" and
each, individually, an "Acquired Company"), INTEGRA NEUROSCIENCES HOLDINGS (UK)
LTD., a corporation organized under the laws of England and Wales ("Buyer"), and
INTEGRA SELECTOR CORPORATION, a Delaware corporation ("ISC").
WHEREAS, pursuant to a Purchase Agreement (the "Purchase Agreement"), dated
as of March 20, 2000, by and among Parent, the Acquired Companies, Buyer and ISC
and the other parties thereto, Buyer has agreed to purchase all of the issued
and outstanding capital shares of NeuroSciences and ISC has agreed to purchase
all of the assets, rights and properties related to the business of the Acquired
Companies located in the United States;
WHEREAS, pursuant to an Asset Purchase Agreement (the "Asset Purchase
Agreement"), dated as of March 20, 2000, by and among Parent, NMT NeuroSciences
(US) Inc. ("NMT-US") and ISC, ISC has agreed to purchase and the assets, rights,
and properties related to the Ruggles(TM) neurosurgical instruments product
line;
WHEREAS, in order to facilitate the transfer of the Business (as
hereinafter defined) to Buyer and ISC in connection with the Purchase Agreement
and the Asset Purchase Agreement, Parent, directly and through its Affiliates,
has agreed to provide the transition services as more fully described in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are acknowledged, the parties agree as
follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. Capitalized terms used but not defined herein will
have the respective meanings ascribed thereto in the Purchase Agreement. In this
Agreement the following terms shall have the meanings assigned to them below.
<PAGE>
"Affiliates" shall mean with respect to any Person, a Person that
directly, or indirectly through one or more intermediaries, controls, was
controlled by, or was under common control with, such Person at December 31,
1999 or any time since such date.
"Business" shall mean the research, development, manufacturing,
marketing, selling and distribution business conducted or currently proposed to
be conducted by Buyer, ISC and the Acquired Companies and their respective
Affiliates related to, or with respect to, the Products.
"Effective Date" shall mean the date of this Agreement.
"Products" shall mean the products manufactured, assembled, repaired,
developed, created, invented or researched by or on behalf of the Acquired
Companies or NMT-US, including, without limitation, the Selector(R) Ultrasonic
Aspirator, cryosurgical, TNS, Ruggles(TM) products lines, products in the
research and development stage and such other products as more particularly
identified on the Schedule of Products attached to the Purchase Agreement or
included as Assets under the Asset Purchase Agreement.
"Recipients" shall collectively mean Buyer, ISC and the Acquired
Companies.
"Service Provider" shall collectively mean Parent and its Affiliates,
including, without limitation, NMT-US, and NMT NeuroSciences Holdings (UK) Ltd.,
a corporation organized under the laws of England and Wales and an indirect
wholly-owned subsidiary of Parent.
"Transition Period" means, for each Transition Service, a period of
sixty (60) days from the Closing Date.
"Transition Services" means the services set forth on Exhibit A hereto
in connection with Recipient's operation of the Business after the Closing Date.
ARTICLE II.
TRANSITION SERVICES
2.1 Provision of Transition Services; Term.
(a) Service Provider will make available to Recipients each of the
Transition Services, commencing on the Effective Date, for the applicable
Transition Period, unless earlier terminated as provided herein.
(b) Service Provider will perform the Transition Services in a manner
substantially similar to the manner in which such services were performed by
Service Provider prior to the Effective Date. Service Provider agrees to perform
the Transition Services using the same standard of care that it uses in
performing such services in its own affairs. Service Provider will only be
obligated to provide Transition Services in a manner consistent with its past
practice (including prioritization among projects for Service Provider and
Recipients).
<PAGE>
2.2 Cost. Service Provider will bear all costs, fees, and expenses,
whether internal, external or otherwise, associated with the provision of
Transition Services hereunder.
2.3 Use of Transition Services. Recipients will use the Transition
Services for substantially the same purposes and in substantially the same
manner as Service Provider used the Transition Services prior to the Closing
Date. Recipients will not resell any Transition Service or otherwise use any
Transition Service in any way other than in connection with the conduct of the
Business consistent with past practice of Service Provider.
2.4 Nature of Transition Service. Recipients acknowledges and
understands that the Transition Services provided hereunder are transitional in
nature and are furnished by the Service Provider solely for the purpose of
facilitating the sale of the Business. Recipients acknowledges and understands
that the Service Provider is not in the business of providing Transition
Services to third parties and has no long-term interest in continuing this
Agreement. Recipients agrees to use best efforts to make a transition to its
own internal organization or any other third party suppliers for the Transition
Services as promptly as practicable.
2.5 Account Processing; Reconciliation. Recipients and Service
Provider agree that during the Transition Period Service Provider shall continue
to: (a) upon the written authorization of Recipients, submit and process
accounts payable (including submission of orders for additional inventory) in
accordance with prior practice and as reasonably required in light of orders for
Products, and (b) collect and process accounts receivable for sales of Products
and related parts and services. Service Provider shall provide Recipients with
a weekly statement of cash disbursement and receipts pursuant to the foregoing
and a reconciliation of net amounts owed to the Service Provider or Recipients,
as the case may be. Within one (1) business day following Recipients' receipt
of said statement, Recipients shall notify Service Provider of their acceptance
thereof and, as applicable, pay to Service Provider any amount owed thereunder;
if Recipients are owed any amounts pursuant to said statement, Service Provider
shall pay such amounts to Recipients (or their designee) within one (1) business
day of Recipients' acceptance thereof. In the event that Recipients disagree
with any amounts set forth on said statement, the parties shall cooperate to
resolve any disputed amounts as soon as practicable after delivery of the
statement.
ARTICLE III.
FURTHER AGREEMENTS
3.1 Confidentiality. Upon the Effective Date, the parties hereto,
and their representatives and assignees shall hold confidential all Confidential
Information obtained from each of the other parties, and their respective
Affiliates in connection herewith and, if the Closing shall be abandoned as
provided in the Purchase Agreement, shall treat such information as confidential
and, where such information is in documentary form, return such information to
Parent. The provisions of this Section 3.1 shall not apply to information which
is in the public domain due to no fault of Buyer or its representatives. The
parties hereto, on their own behalf and on behalf of their respective
representatives and assignees, agree that damages are an inadequate remedy for
breach of this provision and that the non-breaching party shall, whether or not
it is pursuing any potential remedies at law, be entitled to equitable relief in
the form of
<PAGE>
preliminary and permanent injunctions without the posting of a bond or other
security upon any actual or threatened breach of this Section 3.1.
3.2 Advice and Recommendation. Recipients shall in good faith
consider all advice and recommendations of Service Provider relating to the
subject matter of this Agreement. Notwithstanding the foregoing, except as
specifically provided in the Purchase Agreement or the Asset Purchase Agreement,
Recipients shall not have any obligation whatsoever to follow or implement any
such advice or recommendation of Service Provider.
3.3 Relationship of the Parties; No Partnership or Joint Venture.
Service Provider shall perform the Transition Services as an independent
contractor to Recipients. In all matters relating to this agreement, each party
hereto shall retain control over its employees, and employees of one party shall
not be considered employees of the other party. No party shall have any right,
power or authority to create any obligation, express or implied, on behalf of
any other party. Nothing in this Agreement is intended to create or constitute
a joint venture or partnership between the parties hereto or persons referred to
herein.
3.4 Personnel. Transition Services will be performed by Service
Provider's employees or by third parties under contract with Service Provider.
Service Provider will be solely responsible for the payment of all direct and
indirect compensation (including fringe benefits) for Service Provider personnel
assigned to perform services under this Agreement, and will be responsible for
worker's compensation insurance, employment taxes, and other employer
liabilities relating to Service Provider's personnel.
ARTICLE IV.
TERMINATION
4.1 Termination by Recipients. Recipients may terminate this
Agreement at any time upon prior written notice of such termination to Service
Provider.
ARTICLE V.
SALES REPRESENTATIVES, DISTRIBUTORS, AND EMPLOYEE SERVICES
5.1 Sales Representatives and Distributors.
(a) Notwithstanding the Transition Period, Service Provider
shall make available, at the reasonable request of the Recipients, the Service
Provider's commissioned sales representatives and distributors for the continued
sale and distribution of Selector(R) capital equipment and Ruggles(TM)
neurosurgical instruments product line for a period of up to ninety (90) days
following the Effective Date, including, without limitation, commissioned sales
representatives and distributors in the United States and Europe
(b) Recipients will reimburse the Service Provider for all
commissions paid to the Service Provider's commissioned sales representatives
and distributors for Selector(R) capital equipment sales made within the 90-day
period after the Effective Date based on their current
<PAGE>
compensation plan (but in no case shall such commission payable exceed 10% of
such capital equipment sales in the case of commissioned sales representatives
or exceed 20% of such capital equipment sales in the case of distributors)
provided that such sales representatives: (i) provide detailed information on
pending Selector(R) sales including, but not limited to, account name, the
number of units involved in the pending sale, where they are in the selling
process, names of key decision makers/influencers, proposed unit pricing,
competitive threats, outcomes of previous product trials, capital budget money
availability, copies of proposed acquisition methods, identification of issues
that need to be addressed quickly, identification of obstacles to getting the
order, and any other account information deemed important to closing the sale;
(ii) visit the account with the Recipient's NeuroSpecialist for introduction to
key customers; (iii) continue to provide product support to the account with the
full knowledge of the Recipient's NeuroSpecialists for the ninety (90) day
period; and (iv) are available for the purpose of allowing the Recipient's
NeuroSpecialists to build a baseline understanding of the Selector(R) features
and benefits.
(c) In connection with the foregoing, Recipients shall cause its
NeuroSpecialists to work closely with the Service Provider's sales
representatives to learn the details of the sales situation and assume
responsibility for closing the sales.
(d) Recipients will reimburse the Service Provider for all
commissions paid to the Service Provider's commissioned sales representatives
and distributors for Ruggles(TM) purchase orders in excess of $15,000 which were
initiated by the Service Provider's sales representative or distributor.
(e) None of the responsibilities and obligations detailed in this
Section 5.1 shall create any rights of or obligations with respect to third
parties including without limitation, any rights of Service Provider's sales
representatives or distributors to compensation from any Recipients.
5.2 Employee Services. With respect to the employees listed on Schedule
5.2, Recipients shall continue to employ such individuals and to process their
payroll and benefits for a period equal to but not more than four (4) months
from the Effective Date. Service Provider shall reimburse Recipients for all
amounts paid pursuant to this Section 5.2 out of cash reflected on the balance
sheet contemplated by Section 2.3 of the Purchase Agreement. Service Provider
agrees to indemnify and hold harmless the Recipients against any and all
liabilities related to the employees listed on Schedule 5.2.
ARTICLE VI.
MISCELLANEOUS
6.1 Cooperation. The parties hereto will cooperate with each other and
will cause their officers, employees, agents, auditors and representatives to
cooperate with each other during the Transition Period to facilitate the orderly
separation of the Business from the Service Provider and to minimize any
disruption to the respective businesses than might result from the transactions
contemplated hereby.
<PAGE>
6.2 Assignability. This Agreement and the rights and obligations
-------------
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their respective successors (including successors by operation of law),
assigns and legal representatives. This Agreement shall not be assignable by
any party hereto, except that Service Provider and Recipients may assign their
respective rights and obligations hereunder to one or more of its Affiliates,
provided that, the assignor shall guarantee the performance of such assignees
under this Agreement and further provided that if the Affiliate of Recipients to
which the Recipients assigns its rights and obligations under this Agreement
ceases to be an Affiliate of Recipients, Recipients shall cause such former
Affiliate to assign its rights and obligations under this Agreement to
Recipients or one of its Affiliates.
6.3 No Other Representations. Each of the parties acknowledges that
------------------------
in entering into this Agreement it has not relied on any representation,
warranty, agreement or statement not set out in this Agreement or in any of the
Related Agreements (or in any document, instrument or certificate contemplated
hereby or thereby), whether express or implied, and that (in the absence of
fraud) it will not have any right or remedy arising out of any such
representation, warranty, agreement or statement.
6.4 Notices. Any communication to be given hereunder by any parties
-------
to the other party shall be in writing and delivered by messenger, sent by
overnight courier, or transmitted by facsimile or electronic mail (with
confirmation of receipt by the intended party), to the address or designation of
such party set forth below or as changed by such party by notice given
hereunder. A communication transmitted by facsimile shall be deemed effective
when transmitted; a communication sent by overnight courier shall be deemed
effective two business days after being sent; and a communication delivered by
messenger shall be deemed effective when delivered.
if to Service
Provider: c/o NMT Medical, Inc.
27 Wormwood Street
Boston, Massachusetts 02110-1625
Attention: Thomas M. Tully, President
Facsimile: (617) 737-0924
E-mail: [email protected]
------------------
with a copy to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Steven D. Singer, Esq.
Facsimile: (617) 526-5000
E-mail: [email protected]
--------------------------
to Recipients: c/o Integra Life Sciences Corporation
311 Enterprise Drive
Plainsboro, New Jersey 08536
Attention: Stuart M. Essig and
John B. Henneman, III
Facsimile: (609) 275-1082
E-mail: [email protected]
---------------------------
[email protected]
----------------------------
<PAGE>
with a copy to: Latham & Watkins
Sears Tower, Suite 5800
Chicago, Illinois 60606
Attention: Michael D. Levin, Esq.
Facsimile: (312) 993-9767
E-mail: [email protected]
--------------------
The foregoing is not intended to be exclusive; any written communication
actually received shall be effective when received.
6.5 Captions. The section captions used in this Agreement are for
--------
reference and cross-reference purposes only and shall not otherwise affect the
meaning or interpretation of this Agreement.
6.6 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original and all of which shall be deemed
to constitute the same Agreement.
6.7 Choice of Law. This Agreement shall be governed by and construed
-------------
in accordance with the Laws of the State of Delaware, without regard to the
conflict of laws principles thereof.
6.8 Entire Agreement; Amendments and Waivers. This Agreement
----------------------------------------
(including Exhibits and attachments hereto) constitutes the entire agreement
between the parties hereto and supersedes and cancels any prior agreements,
representations, warranties, or communications, whether oral or written, between
the parties hereto relating to the transactions contemplated hereby or the
subject matter herein. This notwithstanding, this Agreement should not be read
in derogation of any of the representation or covenants contained in the
Purchase Agreement or the Asset Purchase Agreement. Neither this Agreement nor
any provision hereof may be changed, waived, discharged or terminated orally,
but only by an agreement in writing signed by the party against whom or which
the enforcement of such change waiver, discharge or termination is sought.
6.9 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein, will,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
then to the maximum extent permitted by law, such invalidity, illegality or
unenforceability will not affect any other provision of this Agreement or any
other such instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers thereunto
duly authorized, all as of the day and year first above written.
PARENT:
------
NMT MEDICAL, INC.
By:_________________________________
Name:
Title:
NEUROSCIENCES:
-------------
NMT NEUROSCIENCES HOLDINGS (UK), LTD.
By:_________________________________
Name:
Title:
ACQUIRED COMPANIES:
------------------
NMT NEUROSCIENCES (UK), LTD.
By:_________________________________
Name:
Title:
SPEMBLY MEDICAL LTD.
By:_________________________________
Name:
Title:
SPEMBLY CRYOSURGERY LTD.
By:_________________________________
Name:
Title:
<PAGE>
SWEDEMED AB
By:_____________________________________
Name:
Title:
BUYER:
-----
INTEGRA NEUROSCIENCES HOLDINGS (UK) LTD.
By:_____________________________________
Name:
Title:
ISC:
---
INTEGRA SELECTOR CORPORATION
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
I. Transition Services / U.S.
--------------------------
In connection with the U.S.-Based Assets related to the business of
the Acquired Companies including, without limitation, the Selector(R) Ultrasonic
Aspirator product line, and the assets, rights and properties related to the
Ruggles(TM) neurosurgical instruments product line, whether acquired through the
Purchase Agreement or the Asset Purchase Agreement, the following transition
services will be provided by the Service Provider:
A. Accounting and Financial Services
To include the following: (i) billing and invoicing; (ii)
collections/accounts receivable processing; (iii) accounts payable processing
(including, without limitation, the placement of purchase orders for inventory
and related parts and equipment at the direction of the Recipients and the
timely payment of invoices in connection therewith); (iv) weekly reporting of
cash disbursement and receipts related to sales, receivables and payables and in
connection with such reporting, reconciliation of net amounts owed to Service
Provider or Recipients; and (vi) such other accounting and financial services
requested by the Recipients from time to time as are consistent with the
operation of the Service Provider's Business prior to the date hereof.
B. Customer Service
To include the following: (i) order entry and customer service,
whether by telephone or by facsimile; and (ii) implementation of a menu or other
electronic/telephonic option on the Service Provider's incoming customer service
telephone line which would allow customers who are either ordering or requesting
information about the Selector(R) Ultrasonic Aspirator or Ruggles(TM) product
lines to select a number which would route their calls directly to Recipient's
Customer Service; provided however, that the Service Provider's obligation to
provide the phone menu service specified in this clause (ii) is subject to the
Service Provider's commercially reasonable efforts.
C. Product Services
To include the following: (i) shipping, at the Recipients' expense,
Products to customers, sales representatives, and distributors; (ii) providing
purchasing support and submitting purchase orders for additional inventory and
related parts and equipment, upon Recipients written authorization; (iii)
warehousing of finished Products; (iv) maintaining insurance for warehoused
Products and for Products in transport pursuant to clause (i) and (v) of this
Subsection C; (v) transportation, at the Service Provider's expense, of the
acquired U.S.-Based inventory, consignment inventory, parts, field samples,
sales and marketing materials, customer lists, customer leads, information,
Confidential Information and data related to or used in the Business (as
detailed in the Purchase Agreement and the Asset Purchase Agreement) including,
without limitation, any and all unshipped orders, from the Service Provider's
facility in Atlanta, Georgia to one or more locations of Recipient's choice upon
completion of this Agreement's
<PAGE>
term; (v) technical support, including service, repair, or replacement of
Products; and (vi) continued monitoring of loaner inventory.
D. Employees
To include the following: access to any and all employees, including
without limitation, service and repair technicians, design engineers, customer
service specialists, and accounting and financial specialists for the purposes
of training or for any other purpose consistent with this Agreement.
E. Information
To include the following: access to any and all commercial information
related to the Business including, without limitation, customer, supplier, and
distributor information.
II. Transition Services / U.K. (Service Provider to Recipient)
----------------------------------------------------------
In connection with the Acquired Companies the following Transition
Services will be provided by the Service Provider:
A. Movex
To include the following: (i) Service Provider shall provide
Recipients with continued use of the Movex System until such time that the
upgraded Chameleon System is fully functional and operational (notwithstanding
any specified duration of the Transition Period hereunder); (ii) Service
Provider shall assist the Recipients with the transfer of all necessary data
from the Movex System to the upgraded Chameleon System; and (iii) after the
transition from the Movex System to the Chameleon System is complete, Service
Provider shall cause the deletion of all data from the Movex system which
relates to any of the Recipients, the Business or the Products and shall take
any other action with regard to the Movex System which is necessary to transfer
to Recipients and delete any confidential information regarding any of the
Recipients, the Business or the Products. In the event that the Chameleon
System is not fully functional and operational by the end of the Transition
Period (except as a result of any act or omission of Service Provider),
Recipients shall pay to Service Provider all out of pocket costs related to
providing continued access to the Movex System to the Recipients not to exceed
US$5000. per month.
B. Information
To include the following: (i) access to any and all commercial
information related to the Acquired Companies including, without limitation,
customer, supplier, and distributor information; (ii) access to any and all
financial information related to the Acquired Companies; (iii) access to any and
all personnel information related to the Acquired Companies; and (iv) access to
any and all other information related to the operation of the Acquired
Companies.
<PAGE>
III. Transition Services / U.K. (Recipient to Service Provider)
----------------------------------------------------------
In connection with the transition of shunt order entries from the
Acquired Companies to Service Provider's facility in Biot, France, the following
Transition Services will be provided to the Service Provider by the Recipient:
A. Customer Service
To include the following: (ii) order entry and customer service,
whether by telephone, by facsimile, or in person; and (ii) assist the Service
Provider in routing customer calls related to the Service Provider's shunt
product line directly to the Service Provider's customer service.
IV. Transition Services / Biot
--------------------------
In connection with the transition of order entries for the Selector(R)
Ultrasonic Aspirator and Ruggles(TM) neurosurgical instruments product lines
from the Service Provider's facility in Biot, France to the Acquired Companies,
the following Transition Services will be provided to the Recipient by the
Service Provider:
A. Customer Service
To include the following: (i) order entry and customer service,
whether by telephone or by facsimile; and (ii) assist the Recipient in routing
customer calls related to the Recipient's Products directly to the Recipients'
customer service.
V. Transition Services / World-Wide
--------------------------------
A. Product Services
To include the following: (i) transportation, at the Service
Provider's expense, of all Assets principally related to the Business,
including, without limitation, all inventory, consignment inventory, parts,
field samples, sales and marketing materials, customer lists, customer leads,
information, Confidential Information and data related to or used in the
Business, wherever located and in whatever form (including, without limitation,
in electronic, digital, or magnetic format) to the Andover Facility; provided
however, this Subsection shall not apply to Products that constitute demo
equipment located at hospitals and TNS products which are currently leased to
third parties pursuant to leases which are not currently in default; and (ii)
maintaining insurance for Products in transport pursuant to clause (i) of this
Subsection A.
<PAGE>
Schedule 5.2
------------
Employee Services
-----------------
. Steve Sinyard
<PAGE>
Schedule 4.2
------------
NONE
Schedule 4.2
<PAGE>
Schedule 16.9
-------------
"Knowledge" Persons
David Chazanovitz
Graham Howe
James St. John
Rob Selwood
Roger Simpson
Steven Sinyard
Patrick Sparkes
Steve Taylor
Thomas M. Tully
Hans van Well
Schedule 16.9
<PAGE>
Exhibit 2.3
ASSET PURCHASE AGREEMENT
by and among
NMT NEUROSCIENCES (US), INC.
as "Seller"
NMT MEDICAL, INC.
as "Parent"
and
INTEGRA SELECTOR CORPORATION
as "Buyer"
Dated as of March 20, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I..........................................................................................................................1
DEFINITIONS........................................................................................................................1
1.1 Certain Defined Terms. As used in this Agreement:...........................................................................1
1.2 Other Defined Terms. Each of the following terms shall have the meanings given it in the Section
set forth opposite such term below:................................................................................................4
ARTICLE II.........................................................................................................................5
PURCHASE AND SALE OF ASSETS........................................................................................................5
2.1 Transfer of Assets. At the Closing, Seller will sell, convey, transfer, assign and deliver to
Buyer, and Buyer will acquire from Seller, the Assets, free and clear of all Encumbrances..........................................5
2.2 Excluded Liabilities. Buyer shall not assume, or otherwise be responsible for, any liabilities or
obligations of Seller, whether actual or contingent, matured or unmatured, known or unknown, and
whether arising out of occurrences prior to, at or after the Closing Date (the "Liabilities")......................................5
2.5 Allocation of Purchase Price. The Purchase Price shall be allocated among the Assets in
accordance with Exhibit 2.5. Buyer and Seller each agree to prepare and file Tax returns in a
manner consistent with this allocation.............................................................................................7
2.6 Transfer Taxes and Transfer Fees. Seller shall be responsible for any documentary and transfer
Taxes and any other Taxes imposed by reason of the transfers of Assets provided for under this
Agreement..........................................................................................................................7
ARTICLE III........................................................................................................................7
CLOSING............................................................................................................................7
3.1 Closing. The Closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Latham & Watkins, Sears Tower, Suite 5800, Chicago, Illinois 60606,
at 10:00 a.m. local time, on March ___, 2000, or on such other date as the parties may agree (in
any case, the "Closing Date")......................................................................................................7
ARTICLE IV.........................................................................................................................7
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT................................................................................7
4.1 Organization.................................................................................................................7
(a) Seller. Seller is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, with full corporate power and authority to conduct the Business as
it is presently being conducted and to own and lease its properties and assets.....................................................7
4.2 Authorization, Etc...........................................................................................................7
(a) Power and Actions Taken. Each of Seller and Parent has all requisite corporate power and
authority and has taken or will take all requisite corporate action necessary, to execute and
deliver this Agreement and the Noncompetition Agreement, to consummate the transactions
contemplated on its part under this Agreement and each the Noncompetition Agreement, and to
perform its obligations under this Agreement and the Noncompetition Agreement......................................................7
(b) Due Execution, Delivery and Enforceability. Each of Seller and Parent has duly executed and
delivered or will duly execute and deliver this Agreement and the Noncompetition Agreement, and
this Agreement and the Noncompetition Agreement is or will be a valid and legally binding
obligation of such party, enforceable against each such party in accordance with its terms, except
to the extent that enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally and subject to general principles of
equity (regardless of whether such enforcement is considered in a proceeding in law or at equity)..................................7
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
4.3 No Conflict or Violation. The execution, delivery and performance of this Agreement and the
Noncompetition Agreement will not: (i) violate or conflict with any provision of the governing
documents of Seller or Parent; (ii) violate any Law; and (iii) violate, conflict with, or
constitute a default (or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the creation of any Encumbrance upon any of the Assets or the
Business pursuant to, any Contract to which Seller or Parent is a party or to which any Assets are
subject.......................................................................................................................... 8
4.4 No Governmental or Other Consents. Except as set forth on Schedule 4.4, no consent or approval
of, notice to, or filing with, any Person is required to be obtained, given or made by Seller or
Parent to permit Seller to transfer any of the Assets to Buyer................................................................... 8
4.5 No Brokers. Seller, Parent and their respective agents have incurred no obligation for brokerage
fees or similar payments in connection with the transactions contemplated by this Agreement...................................... 8
4.7 Permits. (a) Schedule 4.7 contains a complete and accurate list of the Permits and (b) the
Permits constitute all licenses, permits, authorizations, certifications or orders of any
governmental authority that are required to operate the Business as it is now conducted. The
Permits set forth on Schedule 4.7 which are marked with an asterisk are transferable to Buyer at
the Closing...................................................................................................................... 8
4.8 Title and Condition of Certain Assets. Seller has, and will transfer to Buyer at the Closing,
good and marketable title to the Equipment, the Inventory and the other Assets free and clear of
any Encumbrances. The Equipment is usable and operable in good working order and condition, and
is in a reasonable state of repair, subject only to ordinary wear and tear, and has been subject
to regular maintenance........................................................................................................... 8
4.9 Intellectual Property. Schedule 4.9 contains a complete and accurate list of the Intellectual
Property. Except as set forth on Schedule 4.9: (i) Seller's right, title and interest in the
Intellectual Property as owner or, subject to the terms of any applicable license, as licensee, is
valid, enforceable, and uncontested, and is free and clear of all Encumbrances (except to the
extent any of the Intellectual Property is licensed to Seller); (ii) to Seller's and Parent's
knowledge, there are no infringements, unlawful uses, or defaults by any third party under any
license or other agreement with respect to the Intellectual Property; and (iii) Seller is not in
default of any license or other agreement, or infringing upon any rights of any third party, in
its use of the Intellectual Property and neither Seller nor Parent have received any notice
alleging any such default or infringement........................................................................................ 8
4.10 Litigation. There is no Action pending or, to Seller's or Parent's knowledge, threatened: (i)
relating to the Business or the Assets; or (ii) seeking to delay, limit or enjoin any transaction
contemplated by this Agreement................................................................................................... 9
4.11 Inventory. Schedule 4.11 contains a complete and accurate list of addresses at which Inventory is
located. All Inventory reflected in the Financial Statements and all other Inventory acquired by
Seller since the Reference Date was acquired in the ordinary course of business and in a manner
consistent with Seller's regular inventory practices. Except for demonstration Inventory, all
such Inventory is in good and saleable condition, except for products in the development phase
which have not been completed for offer or sale to customers. Except as set forth on Schedule
4.11, none of Inventory is held by any Person (including any Affiliates of Seller) on consignment
or is located outside of the locations shown on Schedule 4.11. Adequate reserves have been
established on Seller's Books and Records with respect to excessive and obsolete Inventory (it
being agreed that for the purposes of this Section 4.11, the term "excessive and obsolete
inventory" shall refer to any on-hand raw materials, parts, supplies, or finished products which
(a) cannot be sold at current prices in the ordinary course of business, (b) which are not usable
in the production of current products, or (c) which consist of on-hand quantities in excess of one
year's historical usage)......................................................................................................... 9
ARTICLE V........................................................................................................................10
REPRESENTATIONS AND WARRANTIES OF BUYER..........................................................................................10
5.1 Organization, Etc. Buyer is a corporation duly organized, validly existing and in good standing
under the laws of Delaware. Buyer has all requisite corporate power and authority, and has taken
or will take all corporate action necessary, to execute and deliver this Agreement and the
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Noncompetition Agreement, to consummate the transactions contemplated on its part under this
Agreement and the Noncompetition Agreement, and to perform its obligations under this Agreement
and the Noncompetition Agreement. This Agreement and the Noncompetition Agreement have been or
will be duly executed and delivered by Buyer and each is or will be a valid and legally binding
obligation of Buyer, enforceable against Buyer in accordance with its terms, except to the extent
that enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors' rights generally and subject to general principles of equity
(regardless of whether such enforcement is considered in a proceeding in law or at equity).....................................10
5.2 No Conflict or Violation. The execution, delivery and performance of this Agreement and the
Noncompetition Agreement by Buyer: (i) will not violate or conflict with any provision of the
governing documents of Buyer; (ii) will not violate any federal, state, local or foreign statute,
rule, regulation, order or judgment of any governmental authority applicable to Buyer; and (iii)
will not violate, conflict with, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, any contract, lease or agreement to which
Buyer is a party, except for any such violation, conflict or default which would not impair
Buyer's ability to perform its obligations under this Agreement or the Noncompetition Agreement....
5.3 Governmental Consents. No consent or approval of, notice to, or filing with, any governmental
authority is required to be made by Buyer to permit Buyer to purchase the Assets from Seller...................................11
5.4 No Brokers. Buyer and its agents have incurred no obligation for brokerage fees or similar
payments in connection with the transactions contemplated by this Agreement....................................................11
ARTICLE VI.....................................................................................................................11
PRE-CLOSING COVENANTS OF SELLER, PARENT AND BUYER
6.1 Access. From the date of this Agreement through the Closing Date, Seller and Parent will (i) give
Buyer and its Representatives full access, during normal business hours and as often as reasonably
requested, to the Assets and the Business, including the Books and Records; and (ii) at Seller's
expense, provide to Buyer all information reasonably requested by Buyer or its Representatives
with respect to the Assets and the Business....................................................................................11
6.4 Risk of Loss. The parties acknowledge that Seller shall bear all risk of loss, destruction or
damage to any of the Assets, from any cause, until the Closing, and thereafter Buyer shall bear
all risk of loss...............................................................................................................12
6.5 Best Efforts To Cause Conditions To Be Satisfied. Between the date of this Agreement and the
Closing, each of Seller and Parent will use its best efforts to cause to be satisfied the
conditions contained in Articles VII and VIII of this Agreement................................................................12
ARTICLE VII....................................................................................................................12
CONDITIONS TO SELLER'S AND PARENT'S OBLIGATIONS...............................................................................12
7.1 Representations, Warranties and Covenants. All representations and warranties of Buyer contained
in Article V of this Agreement shall have been true and correct as of the date of this Agreement
and shall be true and correct in all material respects (without duplication of any materiality
qualifier contained therein) as of the Closing Date, and Buyer shall have performed in all
material respects all covenants required by this Agreement to be performed by it as of or before
the Closing....................................................................................................................12
7.2 No Injunction. There shall not be in effect any injunction or other requirement of a governmental
authority that: (a) restrains or prohibits the transfer of any Assets to Buyer; and (b) has
become effective since the date of this Agreement..............................................................................13
7.3 Noncompetition Agreement. Buyer shall have executed and delivered to Seller and Parent the
Noncompetition Agreement.......................................................................................................13
7.4 Closing Documents. Buyer shall have delivered to Seller the documents shown in the Closing Agenda
attached to this Agreement as Exhibit 7.4 (the "Closing Agenda") as being delivered by Buyer, and
such other instruments and documents as may be reasonably requested by Seller, all in form
reasonably satisfactory to Seller's counsel....................................................................................13
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VIII..................................................................................................................... 13
CONDITIONS TO BUYER'S OBLIGATIONS................................................................................................ 13
8.1 Representations, Warranties and Covenants. All representations and warranties of Seller and
Parent contained in Article IV of this Agreement shall have been true and correct as of the date
of this Agreement and shall be true and correct in all material respects (without duplication of
any materiality qualifier contained therein) as of the Closing Date, and Seller and Parent shall
have performed in all material respects all covenants required by this Agreement to be performed
by any of them as of or before the Closing....................................................................................... 13
8.2 No Actions With Respect to Transactions. No Action shall have been instituted or threatened by
any governmental authority or other Person that challenges, seeks damages in connection with, or
seeks to restrain, any of the transactions contemplated by this Agreement........................................................ 13
8.3 Noncompetition Agreement. Each of Seller and Parent shall have executed and delivered to Buyer
the Noncompetition Agreement..................................................................................................... 13
8.4 Closing Documents. Seller and Parent shall have delivered to Buyer the documents shown in the
Closing Agenda as being delivered by them, and such other instruments and documents as may be
reasonably requested by Buyer, all in form reasonably satisfactory to Buyer's counsel............................................ 13
8.5 No Material Adverse Change. There shall have been no Material Adverse Change since the Reference
Date............................................................................................................................. 13
ARTICLE IX....................................................................................................................... 14
TERMINATION BEFORE CLOSING....................................................................................................... 14
9.1 Termination. This Agreement may be terminated by notice at any time prior to Closing:................................... 14
9.2 In the Event of Termination. In the event of termination of this Agreement:............................................. 14
ARTICLE XI....................................................................................................................... 15
SURVIVAL AND INDEMNIFICATION..................................................................................................... 15
11.1 Survival of Representations. The representations and warranties of the parties made in this
Agreement shall survive the Closing for a period from the Closing to the 18 month anniversary of
the Closing Date (or until resolution of any Indemnity Claim made on or before such date), except
for the representations and warranties made in Section 4.7 with respect to title, which shall
survive the Closing without limitation........................................................................................... 15
11.2 Indemnification.......................................................................................................... 16
ARTICLE XII...................................................................................................................... 18
MISCELLANEOUS.................................................................................................................... 18
12.1 Employees. Buyer shall have no obligation to hire any of Seller's employees............................................. 18
A. Agreements................................................................................................................. 6
</TABLE>
EXHIBITS
--------
1.1(a) Financial Statements
1.1(b) Terms of Noncompetition Agreement
2.5 Allocation of Purchase Price
7.4 Closing Agenda
5
<PAGE>
Disclosure Schedule
-------------------
4.4 Governmental and Other Consents
4.7 Permits (including assignability of Permits)
4.9 List of Intellectual Property
4.11 Locations and Ownership of Inventory
4.12(a) Certain Certifications
4.12(b) Notice re Certifications
4.14 Exports
6
<PAGE>
This Asset Purchase Agreement (this "Agreement") is entered into as of
March 20, 2000, by and among Integra Selector Corporation, a Delaware
corporation ("Buyer"), NMT NeuroSciences (US), Inc., a Delaware corporation
("Seller"), and NMT Medical, Inc., a Delaware corporation ("Parent").
RECITALS
--------
A. Seller owns certain assets used in the conduct of the Business (as
defined below). Parent owns all of the outstanding equity interest in Seller.
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, certain of such assets, upon the terms and subject to the conditions
contained in this Agreement.
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants and representations
contained in this Agreement and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Defined Terms. As used in this Agreement:
---------------------
"Accounts Receivable" shall mean all accounts receivable, notes receivable,
-------------------
rights to refunds, prepayments and deposits.
"Action" shall mean any action, claim (including product liability claim),
------
proceeding, dispute, audit or investigation.
"Affiliate" shall mean, with respect to any Person, a Person that directly,
---------
or indirectly through one or more intermediaries, controls, was controlled by,
or was under common control with, such Person at December 31, 1999 or any time
since such date.
"Assets" shall mean all right, title and interest in and to the business,
------
properties, assets and rights of any kind, whether tangible or intangible, used
in or related to the Business, consisting of all of Seller's right, title and
interest in and to the following (but excluding the Excluded Assets):
(a) Equipment;
(b) Inventory;
(c) Books and Records;
1
<PAGE>
(d) Intellectual Property; and
(e) Permits, to the extent transferable.
"Books and Records" shall mean (i) all records of Seller and Parent
-----------------
relating to the Assets, and (ii) all records of Seller and Parent used in or
relating to the Business or customers or suppliers of the Business, including in
each case (x) any records that are in electronic form, (y) any records relating
to quality assurance, and (z) all lists of vendors, lists of current customers,
lists of past customers, lists or other documents describing prospective
customers (such as sales leads), owned information describing marketing and
selling tactics and strategy, all quality system procedures, policies, orders,
complaints and other records, and all regulatory filings and submissions to the
United States Food and Drug Administration, but excluding in each case (A)
corporate minute books and stock records of Seller and Parent, and (B) records
relating to Seller's and Parent's employees.
"Business" shall mean the Ruggles(R) business of importing, developing,
--------
manufacturing, customizing, marketing, selling and distributing surgical
instruments.
"Contract" shall mean all agreements, contracts, leases (including all
--------
leases with respect to real property), obligations, nongovernmental licenses and
commitments to which Seller is a party or by which Seller is bound, whether oral
or written.
"Disclosure Schedule" shall mean the schedule attached to and incorporated
-------------------
in this Agreement which sets forth the exceptions to the representations and
warranties contained in Article IV of this Agreement and certain other
----------
information called for by Article IV; each reference in Article IV of this
---------- ----------
Agreement to any numbered schedule is a reference to that numbered section of
the Disclosure Schedule.
"Encumbrance" shall mean any claim, lien, pledge, security interest,
-----------
restriction, easement, option or other preemptive right, possessory right,
encumbrance or other similar right.
"Equipment" shall mean all furnishings, machinery, supplies, equipment,
---------
tools and other tangible personal property owned by Seller, Parent, or any of
their respective Affiliates, and used in or related to the Business, wherever
located, including all tools for modifying and repairing instruments.
"Excluded Assets," shall mean the following assets of Seller, Parent or any
---------------
of their respective Affiliates, which (even though used in or related to the
Business) are not to be acquired by Buyer:
(a) Owned Real Property;
(b) Contracts (other than those constituting Intellectual Property);
(c) cash and cash equivalents;
2
<PAGE>
(d) Accounts Receivable;
(e) Permits, to the extent not transferable; and
(f) the tradename "NMT".
"Financial Statements" shall mean (i) a statement of the revenue of Seller
--------------------
for the twelve-month period ended December 31, 1999, and (ii) a statement of the
Inventory Amount as of the Reference Date, all attached to this Agreement as
Exhibit 1.1(a).
- --------------
"GAAP" shall mean United States generally accepted accounting principles as
----
in effect from time to time.
"including" shall mean including without limitation.
---------
"Intellectual Property" shall mean any and all Copyrights, Patents, Know-
---------------------
How, and Trademarks, and all rights (including moral rights) vesting in Seller,
Parent, or any of their respective Affiliates pursuant to any Laws and used in
or related to the Business. For purposes of this definition:
(a) "Copyrights" shall mean all rights, rights to applications for
copyrights, assignments of mask works and registration of any
copyrights, design database rights, and of the foregoing;
(b) "Patents" shall mean continuations-in-part, foreign counterparts
invention patents and patent divisions, reissues, of such patents
and disclosures and applications, if any, reexaminations, extensions
and patent applications, rights in all continuations, and all
inventions;
(c) "Know-How" shall mean industrial designs, know-how, and
documentation and processes, designs methods, devices, show-how,
technical and other proprietary and formulae; and technology, trade
training manuals information, secrets, including proprietary
processes, designs and formulae; and
(d) "Trademarks" shall mean (i) registered trademarks and registered
service marks, applications for registration for trademarks and
service marks, renewal registrations and applications for renewal
registrations, extensions and foreign counterparts of such
registrations and applications for registration; (ii) material
unregistered trademarks and service marks; (iii) corporate names,
business names and trade names, whether registered or unregistered;
and (iv) Internet domain names and associated addresses and URL's,
in each case including (A) any and all embodiments of the Ruggles
mark and (B) all goodwill associated therewith.
3
<PAGE>
"Inventory" shall mean (i) all inventory held for resale with respect to
---------
the Business and owned by Seller or any Affiliate of Seller, including all
inventory on consignment, (ii) all promotional materials with respect to the
Business owned by Seller or any Affiliate of Seller, including all field
samples, demos, hospital loaners and prototypes, and (iii) all raw materials,
work in process, finished products, wrapping, supply and packaging materials and
similar items with respect to the Business owned by Seller or any Affiliate of
Seller, in each case wherever located.
"Inventory Amount" shall mean a calculation of the book value of the
----------------
Inventory as of any date in accordance with GAAP, applied in accordance with
Seller's past practice; provided, however, that in calculating the Inventory
-------- -------
Amount as of any date, reserves shall equal the reserves set forth in the
Financial Statements.
"Law" shall mean any federal, state, local or foreign statute, rule,
---
regulation, order, or judgment of any governmental authority applicable to the
Assets or the Business.
"Material Adverse Effect" or "Material Adverse Change" shall mean a
----------------------- -----------------------
material adverse effect on, or change in, the Assets.
"Noncompetititon Agreement" shall mean a Noncompetition Agreement, dated as
-------------------------
of the Closing, among the parties hereto, containing the provisions set forth in
Exhibit 1.1(b).
- --------------
"Owned Real Property" shall mean all real property owned in fee by Seller,
-------------------
including all rights, easements and privileges appertaining or relating to such
real property and all buildings, fixtures and improvements located on such real
property.
"Permit" shall mean any license, permit, authorization, certificate or
------
order of any governmental authority used in or related to the Business.
"Person" shall mean any individual, corporation, general or limited
------
partnership, limited liability company, trust, governmental body or other
entity.
"Reference Date" shall mean December 31, 1999
--------------
"Representative" shall mean, with respect to any Person, any officer,
--------------
director, principal, attorney, agent, employee or other representative of such
Person.
"Tax" shall mean any federal, state, local or foreign tax, assessment or
---
other government charge, including any income, property, payroll, sales and
transfer tax, and any penalty in connection with any such tax.
1.2 Other Defined Terms. Each of the following terms shall have the
-------------------
meanings given it in the Section set forth opposite such term below:
4
<PAGE>
Term Section
---- -------
Agreement Preamble
Base Inventory Amount 2.3(b)
Buyer Preamble
Closing 3.1
Closing Agenda 7.4
Closing Date 3.1
Closing Inventory Statement 2.4(a)
Closing Payment 2.3(b)
Dispute Notice 2.4(c)
Indemnified Party 11.2(c)
Indemnifying Party 11.2(c)
Liabilities 2.2
Losses 11.2(a)
Parent Preamble
Product Safety Regulations 4.12(a)
Purchase Price 2.3
Seller Preamble
Seller's Accountants 2.4(a)
ARTICLE II
PURCHASE AND SALE OF ASSETS
---------------------------
2.1 Transfer of Assets. At the Closing, Seller will sell, convey,
------------------
transfer, assign and deliver to Buyer, and Buyer will acquire from Seller, the
Assets, free and clear of all Encumbrances.
2.2 Excluded Liabilities. Buyer shall not assume, or otherwise be
--------------------
responsible for, any liabilities or obligations of Seller, whether actual or
contingent, matured or unmatured, known or unknown, and whether arising out of
occurrences prior to, at or after the Closing Date (the "Liabilities").
2.3 Purchase Price. The purchase price for the Assets and Seller's and
--------------
Parent's entry into the Noncompetition Agreement (the "Purchase Price") shall
be:
(a) $2,000,000 (Two Million Dollars); plus
----
(b) the estimate of the Inventory Amount delivered to Buyer at Closing
(the "Base Inventory Amount"); ((a) and (b) being the "Closing
Payment"), plus or minus,
-------------
(c) the post-closing adjustment provided for in Section 2.4 of this
-----------
Agreement.
To the extent Buyer is required to withhold amounts from the Closing Payment to
satisfy any tax withholding obligation of any applicable Tax authority in
connection with or as a result of the transaction contemplated hereby, the
amount of the Closing Payment shall be reduced by such
5
<PAGE>
amounts to be withheld. At the Closing, Buyer shall pay to Seller the Closing
Payment (less any amounts set forth in the preceding sentence) by wire transfer
of immediately available funds to an account designated by Parent.
2.4 Post-Closing Adjustment.
-----------------------
(a) Closing Inventory Statement. No later than (15) days after the
---------------------------
Closing, Seller and Parent shall cause Arthur Andersen, Seller's independent
accounts ("Seller's Accountants"), to deliver to Buyer (i) an itemization of the
Inventory and (ii) a calculation of the Inventory Amount as of the Closing Date
(the "Closing Inventory Statement"). As part of the preparation of the Closing
Inventory Statement, Buyer may, at its option, conduct, or cause to be
conducted, its own physical inventory, which may be observed by Seller and/or
its Representatives.
(b) Review and Cooperation. Buyer, its independent accountants, and its
----------------------
other Representatives shall have the right to review the Closing Inventory
Statement, and Parent and Seller will cooperate with them in the review process
and will provide them reasonable access to all information used in the
preparation of the Closing Inventory Statement.
(c) Dispute Resolution. Pursuant to such review, no later than (15) days
------------------
after its receipt of the Closing Inventory Statement, Buyer shall deliver to
Seller a notice (the "Dispute Notice") describing any item or amount in the
Closing Inventory Statement that is disputed by Buyer. If Buyer does not
deliver a Dispute Notice to Seller, then the Closing Inventory Statement shall
be deemed to be final and binding on the parties. The parties shall attempt to
resolve any such dispute, but if they cannot do so within (30) days after the
date of receipt of the Dispute Notice, then the parties shall jointly select an
independent accountant to do so. If the parties cannot agree on the appointment
of such independent accountant, such accountant shall be selected at random from
a list comprised of two firms chosen by Parent and two firms chosen by Buyer
(which firms shall not have been engaged by Parent, Buyer or any of their
Affiliates during the prior (3) years). The determination of the Inventory
Amount on the final Closing Inventory Statement made by such independent
accountant will be final and binding on the parties, and Buyer, on the one hand,
and Parent and Seller, on the other, will share equally the cost of retaining
such independent accountant.
(d) Adjustment Payment. No later than (10) days after the final
------------------
determination of the Inventory Amount pursuant to clause (c) above, the
following payments, as applicable, shall be made by wire transfer of immediately
available funds: (i) if the Inventory Amount on the final Closing Inventory
Statement is greater than the Base Inventory Amount, then Buyer will pay to
Seller the difference between the two; or (ii) if the Inventory Amount on the
final Closing Inventory Statement is less than the Base Inventory Amount, then
Parent will pay (or cause Seller to pay) to Buyer the difference between the
two; provided, however, that no payment will be required by any party unless the
-------- -------
difference between the Inventory Amount on the final Closing Inventory Statement
and the Base Inventory Amount is at least $20,000 (Twenty Thousand Dollars) (in
which case payment of the full amount of the difference will be required).
6
<PAGE>
2.5 Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
among the Assets in accordance with Exhibit 2.5. Buyer and Seller each agree to
-----------
prepare and file Tax returns in a manner consistent with this allocation.
2.6 Transfer Taxes and Transfer Fees. Seller shall be responsible for any
--------------------------------
documentary and transfer Taxes and any other Taxes imposed by reason of the
transfers of Assets provided for under this Agreement.
ARTICLE III
CLOSING
-------
3.1 Closing. The Closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of Latham & Watkins,
Sears Tower, Suite 5800, Chicago, Illinois 60606, at 10:00 a.m. local time, on
March ___, 2000, or on such other date as the parties may agree (in any case,
the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
---------------------------------------------------
Seller and Parent, jointly and severally, represent and warrant to Buyer as
of the date of this Agreement and as of the Closing Date, as follows:
4.1 Organization.
-------------
(a) Seller. Seller is a corporation duly organized, validly existing and
------
in good standing under the laws of the State of Delaware, with full corporate
power and authority to conduct the Business as it is presently being conducted
and to own and lease its properties and assets.
(b) Parent. Parent is a corporation duly organized, validly existing and
------
in good standing under the laws of the State of Delaware. Parent is the sole
stockholder of Seller and, except for Parent, no Person holds any equity
interest in, or has any subscription right, preemptive right, warrant, option or
other right to acquire any equity interest in, Seller.
4.2 Authorization, Etc.
------------------
(a) Power and Actions Taken. Each of Seller and Parent has all requisite
-----------------------
corporate power and authority and has taken or will take all requisite corporate
action necessary, to execute and deliver this Agreement and the Noncompetition
Agreement, to consummate the transactions contemplated on its part under this
Agreement and each the Noncompetition Agreement, and to perform its obligations
under this Agreement and the Noncompetition Agreement.
(b) Due Execution, Delivery and Enforceability. Each of Seller and Parent
------------------------------------------
has duly executed and delivered or will duly execute and deliver this Agreement
and the Noncompetition Agreement, and this Agreement and the Noncompetition
Agreement is or will be a valid and
7
<PAGE>
legally binding obligation of such party, enforceable against each such party in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally and subject to general principles of
equity (regardless of whether such enforcement is considered in a proceeding in
law or at equity).
4.3 No Conflict or Violation. The execution, delivery and performance of
------------------------
this Agreement and the Noncompetition Agreement will not: (i) violate or
conflict with any provision of the governing documents of Seller or Parent; (ii)
violate any Law; and (iii) violate, conflict with, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the creation of any Encumbrance upon any of the
Assets or the Business pursuant to, any Contract to which Seller or Parent is a
party or to which any Assets are subject.
4.4 No Governmental or Other Consents. Except as set forth on Schedule
--------------------------------- --------
4.4, no consent or approval of, notice to, or filing with, any Person is
- ---
required to be obtained, given or made by Seller or Parent to permit Seller to
transfer any of the Assets to Buyer.
4.5 No Brokers. Seller, Parent and their respective agents have incurred
----------
no obligation for brokerage fees or similar payments in connection with the
transactions contemplated by this Agreement.
4.6 Financial Statements. The Financial Statements: (i) are in
--------------------
accordance with the Books and Records of Seller; and (ii) fairly present in all
material respects the revenues of Seller for the twelve-month period ended
December 31, 1999 and the Inventory Amount as of the Reference Date.
4.7 Permits. (a) Schedule 4.7 contains a complete and accurate list of
------- ------------
the Permits and (b) the Permits constitute all licenses, permits,
authorizations, certifications or orders of any governmental authority that are
required to operate the Business as it is now conducted. The Permits set forth
on Schedule 4.7 which are marked with an asterisk are transferable to Buyer at
------------
the Closing.
4.8 Title and Condition of Certain Assets. Seller has, and will transfer
-------------------------------------
to Buyer at the Closing, good and marketable title to the Equipment, the
Inventory and the other Assets free and clear of any Encumbrances. The
Equipment is usable and operable in good working order and condition, and is in
a reasonable state of repair, subject only to ordinary wear and tear, and has
been subject to regular maintenance.
4.9 Intellectual Property. Schedule 4.9 contains a complete and accurate
--------------------- ------------
list of the Intellectual Property. Except as set forth on Schedule 4.9: (i)
------------
Seller's right, title and interest in the Intellectual Property as owner or,
subject to the terms of any applicable license, as licensee, is valid,
enforceable, and uncontested, and is free and clear of all Encumbrances (except
to the extent any of the Intellectual Property is licensed to Seller); (ii) to
Seller's and Parent's knowledge, there are no infringements, unlawful uses, or
defaults by any third party under any
8
<PAGE>
license or other agreement with respect to the Intellectual Property; and (iii)
Seller is not in default of any license or other agreement, or infringing upon
any rights of any third party, in its use of the Intellectual Property and
neither Seller nor Parent have received any notice alleging any such default or
infringement.
4.10 Litigation. There is no Action pending or, to Seller's or Parent's
----------
knowledge, threatened: (i) relating to the Business or the Assets; or (ii)
seeking to delay, limit or enjoin any transaction contemplated by this
Agreement.
4.11 Inventory. Schedule 4.11 contains a complete and accurate list of
--------- -------------
addresses at which Inventory is located. All Inventory reflected in the
Financial Statements and all other Inventory acquired by Seller since the
Reference Date was acquired in the ordinary course of business and in a manner
consistent with Seller's regular inventory practices. Except for demonstration
Inventory, all such Inventory is in good and saleable condition, except for
products in the development phase which have not been completed for offer or
sale to customers. Except as set forth on Schedule 4.11, none of Inventory is
-------------
held by any Person (including any Affiliates of Seller) on consignment or is
located outside of the locations shown on Schedule 4.11. Adequate reserves have
-------------
been established on Seller's Books and Records with respect to excessive and
obsolete Inventory (it being agreed that for the purposes of this Section 4.11,
------------
the term "excessive and obsolete inventory" shall refer to any on-hand raw
materials, parts, supplies, or finished products which (a) cannot be sold at
current prices in the ordinary course of business, (b) which are not usable in
the production of current products, or (c) which consist of on-hand quantities
in excess of one year's historical usage).
4.12 Certifications; Product Safety; Other Laws and Permits.
------------------------------------------------------
(a) Except as set forth on Schedule 4.12(a), (i) all operations of the
----------------
Business have achieved and maintained the ISO 9001 and quality certifications
and are compliant with United States Food and Drug Administration Quality System
Regulations (collectively, the "Product Safety Regulations") in all material
respects, and (ii) there is no pending, and neither Parent nor Seller has
received any notice of, nor is aware of, any threatened, action to audit,
repeal, fail to renew or challenge any of such certification.
(b) Except as set forth on Schedule 4.12(b), none of Parent, Seller,
----------------
or their respective Affiliates has been required to file any notification or
other report with or provide information to any product safety agency,
commission, board or other governmental authority of any jurisdiction concerning
actual or potential hazards with respect to any product manufactured,
distributed, sold or leased or service rendered by Seller or the Business or any
employee or agent thereof. Each product manufactured, sold or leased, or
service rendered by Seller or the Business complies in all material respects
with all product safety standards of each applicable product safety agency,
commission, board or other governmental authority.
(c) Seller has not, in the conduct of the Business or the use of the
Assets, violated any Law or Permit (excluding the Product Safety Regulations),
except where such violation has not had and will not have a Material Adverse
Effect, and neither Seller nor Parent
9
<PAGE>
has received any notice to the effect that, or otherwise been advised that,
either the Business or the Assets are not in compliance with any Law or Permit.
4.13 Customers, Suppliers and Licensors. None of Parent, Seller or their
----------------------------------
respective Affiliates has received written notice of or has knowledge that any
customers or distributors of, or suppliers or licensors to, the Business has
taken any action (or intends or could reasonably be expected to take any action
as a result of the transactions contemplated hereby), which could materially
adversely affect the business relationship of Seller or the Business with such
customer, distributor, supplier or licensor.
4.14 Export. Except as set forth on Schedule 4.14, neither Parent nor
------ -------------
Seller has sold at any time since July 8, 1998, or to the knowledge of Parent or
Seller, at any time prior thereto, directly or indirectly through any Affiliate,
or to its knowledge through a distributor or other Person, any products of the
Business in or to any of the following countries (or to any Person acting on
behalf of any of the following countries): Burma (Myanmar), Cuba, Libya, Iran,
Iraq, North Korea, Sudan, Syria, Yugoslavia, or the Taliban in Afghanistan or
UNITA in Angola.
4.15 Product Liability Claims. Seller has maintained product liability
------------------------
insurance coverage in amounts of not less than $1,000,000 per occurrence and
$10,000,000 in the aggregate with respect to products of the Business
manufactured, sold, distributed or delivered by Seller. Such products liability
insurance is on a claims made basis.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller and Parent, as of the date of
this Agreement and as of the Closing Date, as follows:
5.1 Organization, Etc. Buyer is a corporation duly organized, validly
-----------------
existing and in good standing under the laws of Delaware. Buyer has all
requisite corporate power and authority, and has taken or will take all
corporate action necessary, to execute and deliver this Agreement and the
Noncompetition Agreement, to consummate the transactions contemplated on its
part under this Agreement and the Noncompetition Agreement, and to perform its
obligations under this Agreement and the Noncompetition Agreement. This
Agreement and the Noncompetition Agreement have been or will be duly executed
and delivered by Buyer and each is or will be a valid and legally binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally and subject to general principles of equity (regardless of
whether such enforcement is considered in a proceeding in law or at equity).
5.2 No Conflict or Violation. The execution, delivery and performance of
------------------------
this Agreement and the Noncompetition Agreement by Buyer: (i) will not violate
or conflict with any provision of the governing documents of Buyer; (ii) will
not violate any federal, state, local or foreign statute, rule, regulation,
order or judgment of any governmental authority applicable to Buyer; and (iii)
will not violate, conflict with, or constitute a default (or an event which,
with
10
<PAGE>
notice or lapse of time or both, would constitute a default) under, any
contract, lease or agreement to which Buyer is a party, except for any such
violation, conflict or default which would not impair Buyer's ability to perform
its obligations under this Agreement or the Noncompetition Agreement.
5.3 Governmental Consents. No consent or approval of, notice to, or
---------------------
filing with, any governmental authority is required to be made by Buyer to
permit Buyer to purchase the Assets from Seller.
5.4 No Brokers. Buyer and its agents have incurred no obligation for
----------
brokerage fees or similar payments in connection with the transactions
contemplated by this Agreement.
ARTICLE VI
PRE-CLOSING COVENANTS OF SELLER, PARENT AND BUYER
-------------------------------------------------
Seller, Parent and Buyer covenant with each other as follows:
6.1 Access. From the date of this Agreement through the Closing Date,
------
Seller and Parent will (i) give Buyer and its Representatives full access,
during normal business hours and as often as reasonably requested, to the Assets
and the Business, including the Books and Records; and (ii) at Seller's expense,
provide to Buyer all information reasonably requested by Buyer or its
Representatives with respect to the Assets and the Business.
6.2 Operation of the Business. Between the date of this Agreement and the
-------------------------
Closing, Seller and Parent will:
(i) conduct the Business (including the collection of Accounts
Receivable) only in the ordinary course of business, consistent with past
practices;
(ii) use their best efforts to maintain existing positive relations
with suppliers, customers and others having business relationships with the
Business;
(iii) confer with Buyer concerning operational matters of material
nature; and
(iv) otherwise report periodically to Buyer concerning the status of
the Business.
6.3 Notification. Between the date of this Agreement and the Closing,
------------
each party will promptly notify the other parties upon becoming aware of (a) any
breach, when made, of the representations and warranties contained in Article IV
----------
or V of this Agreement, (b) any fact that would constitute such a breach if such
- ----
representations and warranties had been made as of the time of its awareness of
such fact, (c) any breach of a covenant contained in this Agreement, or (d) any
fact that makes the satisfaction of any condition contained in Article VII or
--------------
VIII of this Agreement impossible or unlikely.
- ----
11
<PAGE>
6.4 Risk of Loss. The parties acknowledge that Seller shall bear all risk
------------
of loss, destruction or damage to any of the Assets, from any cause, until the
Closing, and thereafter Buyer shall bear all risk of loss.
6.5 Best Efforts To Cause Conditions To Be Satisfied. Between the date of
------------------------------------------------
this Agreement and the Closing, each of Seller and Parent will use its best
efforts to cause to be satisfied the conditions contained in Articles VII and
----------------
VIII of this Agreement.
- ----
6.6 Agreement on Assignment of Assets. Prior to the Closing Date, Seller
---------------------------------
shall cause all Assets owned by Parent, or an Affiliate of Parent or Seller, to
be assigned to Seller.
6.7 Obtaining Transfer of Permits. To the extent that Permits are
-----------------------------
transferable by Seller to Buyer, Seller and Parent will promptly execute and
file with the appropriate governmental authorities applications for approval of
the transfer of all such Permits to Buyer. Each of Seller and Parent will use
its best efforts to:
(a) obtain all consents of governmental authorities required for the
transfer of such Permits to Buyer; and
(b) assist Buyer in obtaining all new Permits necessary for the operation
of the Business by Buyer following the Closing.
6.8 Exclusivity. Prior to the Closing Date or the date on which this
-----------
Agreement is terminated pursuant to Article IX, neither Parent, Seller, nor any
----------
of their respective Affiliates nor any of their respective Representatives shall
directly, or indirectly through any other Person, encourage, solicit, initiate,
engage or participate in discussions or negotiations with any Person (other than
Buyer) concerning any merger, consolidation, sale, lease or licensing of assets,
sale of equity interests, or other business combination involving the Assets or
the Business, or (b) provide any non-public information concerning the Assets,
or the Business to any Person (other than Buyer). Parent and Seller shall
immediately notify Buyer of, and shall disclose to Buyer all details of, any
inquires, discussions or negotiations of the nature described in the first
sentence of this Section 6.8.
-----------
ARTICLE VII
CONDITIONS TO SELLER'S AND PARENT'S OBLIGATIONS
-----------------------------------------------
The obligations of Seller and Parent with respect to consummation of the
transactions provided for in this Agreement are subject, in the discretion of
Seller and Parent, to the satisfaction at or before the Closing of the following
conditions:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Buyer contained in Article V of this Agreement shall have been
---------
true and correct as of the date of this Agreement and shall be true and correct
in all material respects (without duplication of any materiality qualifier
contained therein) as of the Closing Date, and Buyer shall have performed in
12
<PAGE>
all material respects all covenants required by this Agreement to be performed
by it as of or before the Closing.
7.2 No Injunction. There shall not be in effect any injunction or other
-------------
requirement of a governmental authority that: (a) restrains or prohibits the
transfer of any Assets to Buyer; and (b) has become effective since the date of
this Agreement.
7.3 Noncompetition Agreement. Buyer shall have executed and delivered to
------------------------
Seller and Parent the Noncompetition Agreement.
7.4 Closing Documents. Buyer shall have delivered to Seller the documents
-----------------
shown in the Closing Agenda attached to this Agreement as Exhibit 7.4 (the
-----------
"Closing Agenda") as being delivered by Buyer, and such other instruments and
documents as may be reasonably requested by Seller, all in form reasonably
satisfactory to Seller's counsel.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to consummate the transactions provided for in
this Agreement are subject, in the discretion of Buyer, to the satisfaction at
or before the Closing of the following conditions:
8.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Seller and Parent contained in Article IV of this Agreement shall
----------
have been true and correct as of the date of this Agreement and shall be true
and correct in all material respects (without duplication of any materiality
qualifier contained therein) as of the Closing Date, and Seller and Parent shall
have performed in all material respects all covenants required by this Agreement
to be performed by any of them as of or before the Closing.
8.2 No Actions With Respect to Transactions. No Action shall have been
---------------------------------------
instituted or threatened by any governmental authority or other Person that
challenges, seeks damages in connection with, or seeks to restrain, any of the
transactions contemplated by this Agreement.
8.3 Noncompetition Agreement. Each of Seller and Parent shall have
------------------------
executed and delivered to Buyer the Noncompetition Agreement.
8.4 Closing Documents. Seller and Parent shall have delivered to Buyer
-----------------
the documents shown in the Closing Agenda as being delivered by them, and such
other instruments and documents as may be reasonably requested by Buyer, all in
form reasonably satisfactory to Buyer's counsel.
8.5 No Material Adverse Change. There shall have been no Material Adverse
--------------------------
Change since the Reference Date.
13
<PAGE>
ARTICLE IX
TERMINATION BEFORE CLOSING
--------------------------
9.1 Termination. This Agreement may be terminated by notice at any time
-----------
prior to Closing:
(a) By written consent of Buyer, Parent and Seller;
(b) By Buyer or Seller if the Closing shall not have occurred on or before
April 30, 2000; provided however, that this provision shall not be available to
-------- -------
Buyer if Seller has the right to terminate this Agreement under clause (d) of
this Section 9.1, and this provision shall not be available to Seller if Buyer
-----------
has the right to terminate this Agreement under clause (c) of this Section 9.1;
-----------
(c) By Buyer if (i) there is a material breach of any covenant to be
performed by Parent or Seller under this Agreement which has not been waived by
Buyer, (ii) any of the conditions contained in Article VIII of this Agreement
------------
has not been satisfied or waived by Buyer as of the Closing, or (iii)
satisfaction of any of the conditions contained in Article VIII of this
------------
Agreement has become impossible (other than through a breach of a covenant
contained in this Agreement by Buyer) and Buyer has not waived such condition;
or
(d) By Seller if (i) there is a material breach of any covenant to be
performed by Buyer under this Agreement which has not been waived by Seller,
(ii) any of the conditions contained in Article VII of this Agreement has not
-----------
been satisfied or waived by Seller as of the Closing, or (iii) satisfaction of
any of the conditions contained in Article VII of this Agreement has become
-----------
impossible (other than through a breach of covenant contained in this Agreement
by Seller or Parent) and Seller has not waived such condition.
9.2 In the Event of Termination. In the event of termination of this
---------------------------
Agreement:
(a) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated by this
Agreement, whether so obtained before or after the execution of this Agreement,
to the party furnishing the same;
(b) The provisions of Section 12.15 (Confidentiality) shall continue in
-------------
full force and effect; and
(c) No party hereto shall have any liability to any other party to this
Agreement, except as stated in this Section 9.2 and except for any breach of a
-----------
covenant contained in this Agreement occurring prior to the proper termination
of this Agreement. The foregoing provisions shall not limit or restrict the
availability of specific performance or other injunctive relief to the extent
that specific performance or such other relief would otherwise be available to a
party hereunder.
14
<PAGE>
ARTICLE X
ACTIONS BY THE PARTIES AFTER THE CLOSING
----------------------------------------
10.1 Storage of Assets; Use of Certain Equipment. Seller and Parent shall
-------------------------------------------
allow Buyer to store the Assets at their current location at no cost to Buyer
for a period of 60 days after the Closing Date. Seller and Parent shall give
Buyer and its Representatives reasonable access to Seller's and Parent's
facilities to allow Buyer to remove the Assets. In addition, Seller shall allow
Buyer to use Seller's bins and racks to assist in the storage and removal of the
Assets.
10.2 Customer Service. For a period of 30 days after the Closing, Seller
----------------
shall, at its expense, provide all assistance reasonably requested by Buyer with
transition customer service matters with respect to the Business.
10.3 Cooperation. From time to time after the Closing, Parent, Seller and
-----------
Buyer shall, and shall cause their respective Affiliates to, at the reasonable
request of Buyer or Parent, as the case may be, and without further
consideration, execute and deliver such further instruments of assignment,
transfer or license and take such further actions as Buyer or Parent may
reasonably request in order more effectively to transfer, reduce to possession,
vest in, and record title to any of the Assets more fully to Buyer, including
cooperation before and after the Closing on matters relating to identification
of the Assets, ordering and relocation of Inventory, and preservation of
relationships with customers, suppliers and distributors. The parties shall
render, at no additional cost or charge to the other, such cooperation to one
another with respect to such matters and with respect to such other matters
concerning the transition of control of the Business as reason and commercial
prudence dictate should be addressed before and after the Closing; provided,
--------
however, that reasonable out of pocket expenses incurred in compliance with this
- -------
Section 10.3 by one party at the request of another party shall be promptly
- ------------
reimbursed by the requesting party to the party incurring such expenses.
10.4 Agreement on Transfer of Assets. Within 60 days following the Closing
-------------------------------
Date Seller shall and shall cause Parent and its Affiliates to, at no cost to
Buyer, transfer all of the Assets located in the United States to Seller's
facility in Atlanta, Georgia, provided however, this provision shall not apply
to demo equipment located at hospitals. Within 60 days following the Closing
Date, Seller shall and shall cause Parent and its Affiliates to, at no cost to
Buyer, transfer all of the Assets not located in the United States to Seller's
facility in Newbury Road, Hampshire, England, provided however, this provision
shall not apply to demo equipment located at hospitals.
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
----------------------------
11.1 Survival of Representations. The representations and warranties of
---------------------------
the parties made in this Agreement shall survive the Closing for a period from
the Closing to the 18 month anniversary of the Closing Date (or until resolution
of any Indemnity Claim made on or before such date), except for the
representations and warranties made in Section 4.7 with respect to title, which
------------
shall survive the Closing without limitation.
15
<PAGE>
11.2 Indemnification.
---------------
(a) By Parent and Seller. Parent and Seller hereby jointly and severally
--------------------
indemnify, save and hold harmless Buyer, its affiliates and subsidiaries, and
its and their respective Representatives, from and against any and all costs,
losses (including diminution in value), Taxes, liabilities, obligations,
damages, Actions, claims, costs of mitigation or remedial action, and expenses,
including attorneys' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing ("Losses"), incurred in connection with or
arising out of:
(i) subject to Section 11.2(e)(i), any breach of any representation
------------------
or warranty made by Parent or Seller in this Agreement or in documents delivered
at the Closing (without regard, for purposes of this Section 11.2(a)(i), to any
------------------
qualifications as to materiality, Material Adverse Change or Material Adverse
Effect);
(ii) any breach of any covenant by Parent or Seller in this
Agreement or the Noncompetition Agreement;
(iii) any Liability (including any Liability for Taxes);
(iv) any severance or other obligation due to any employee or former
employee of Seller and deemed to arise out of the Closing or as a consequence of
the execution and delivery of this Agreement and any Liability resulting from
Buyer's election not to hire any employee of Seller; or
(v) any noncompliance by Seller or Parent with applicable bulk
sales laws (whether such laws are UCC-based or Tax-related) in connection with
the transfer of the Assets or Buyer's nonwithholding of any amounts from the
Closing Payment to satisfy any Tax withholding obligation of any Tax authority
deemed to arise out of the Closing.
(b) By Buyer. Buyer hereby indemnifies, saves and holds harmless Parent,
--------
Seller, their respective affiliates and subsidiaries, and their respective
Representatives, from and against any and all Losses incurred in connection with
or arising out of:
(i) Subject to Section 11.2(e)(ii), any breach of any
------------------------------
representation or warranty made by Buyer in this Agreement or in any documents
delivered at the Closing (without regard, for purposes of this Section
-------
11.2(b)(i), to any qualifications as to materiality);
- ----------
(ii) any breach of any covenant by Buyer in this Agreement or the
Noncompetition Agreement; or
(iii) the operation of the Business by Buyer after the Closing.
(c) Claims for Indemnification. Whenever any claim shall arise for
--------------------------
indemnification hereunder, the party seeking indemnification (the "Indemnified
Party") shall promptly notify the party from whom indemnification is sought (the
"Indemnifying Party") of the claim and, when
16
<PAGE>
known, the facts constituting the basis for such claim. For purposes of this
Section 11.2(c)(i), notice shall be deemed to be promptly made if it is given to
- ------------------
the Indemnifying Party within ten (10) days of receipt by the Indemnified Party
of any written notice of any third party claim. In the event of any claim for
indemnification under this Agreement resulting from or in connection with any
claim or legal proceedings by a third party, the notice to the Indemnifying
Party shall specify, if known, the amount or an estimate of the amount of the
Liability arising from such claim or legal proceeding. Except as provided in
Section 11.2(e) of this Agreement, the Indemnified Party shall not settle or
- ---------------
compromise any claim by a third party for which it may claim indemnification
under this Agreement without the prior written consent of the Indemnifying
Party.
(d) Defense by Indemnifying Party. In connection with any claim by any
-----------------------------
Indemnified Party resulting from or arising out of any claim or legal proceeding
by a person who is not a party to this Agreement, the Indemnifying Party at its
sole cost and expense may, upon written notice to the Indemnified Party, assume
the defense of any such claim or legal proceeding if it acknowledges to the
Indemnified Party in writing its obligation to indemnify the Indemnified Party
with respect to all elements of such claim. The Indemnified Party shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. If the Indemnifying Party does not
assume the defense of any such claim or litigation resulting therefrom within
thirty (30) days after the date of such claim is made, (a) the Indemnified Party
may defend against such claim or litigation, in such manner as it may deem
appropriate, including, but not limited to, settling such claim or litigation,
after giving notice of the same to the Indemnifying Party, on such terms as the
Indemnified Party may deem appropriate, and (b) the Indemnifying Party shall be
entitled to participate in (but not control) the defense of such action, with
its own counsel and at its own expense.
(e) Limits on Liability.
-------------------
(i) Parent and Seller shall not be obligated to indemnify Buyer
under Section 11.2(a)(i) and Buyer shall not seek such indemnification from
----------
Parent or Seller for Losses that arise out of the inaccuracy of any
representation or warranty under this Agreement unless such Losses aggregate
more than $20,000 (Twenty Thousand Dollars), in which event Parent and Seller
shall indemnify Buyer for the entire amount of such Losses up to a maximum
amount equal to the Purchase Price.
(ii) Buyer shall not be obligated to indemnify Parent and Seller
under Section 11.2(b)(i) and neither Seller nor Parent shall seek such
------------------
indemnification from Buyer for Losses that arise out of the inaccuracy of any
representation or warranty under this Agreement unless such Losses aggregate
more than $20,000 (Twenty Thousand Dollars), in which event Buyer shall
indemnify Parent and Seller for the entire amount of such Losses up to a maximum
amount equal to the Purchase Price.
17
<PAGE>
ARTICLE XII
MISCELLANEOUS
-------------
12.1 Employees. Buyer shall have no obligation to hire any of Seller's
---------
employees.
12.2 Payment of Expenses. Except as specifically set forth elsewhere in this
-------------------
Agreement, expenses related to this Agreement and attendant transactions,
including the fees of counsel and accountants, shall be borne by the party
incurring such expenses.
12.3 Modifications; Waivers. This Agreement maybe modified and rights
----------------------
hereunder may be waived only by a writing executed and delivered on behalf of
the party against whom such modification or waiver is asserted. In no case
shall any such modification or waiver be effective without the written consent
of Buyer.
12.4 Assignability. This Agreement and the rights and obligations hereunder
-------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors (including successors by operation of law), assigns and
legal representatives. This Agreement shall not be assignable by any party
hereto, except that Buyer may assign its rights and obligations hereunder to one
or more of its Affiliates.
12.5 No Other Representations. Each of the parties acknowledges that in
------------------------
entering into this Agreement it has not relied on any representation, warranty,
agreement of statement not set out in this Agreement or the Noncompetition
Agreement (or in any document, instrument or certificate contemplated hereby or
thereby), whether express or implied, and that (in the absence of fraud) it will
not have any right or remedy arising out of any such representation, warranty,
agreement or statement.
12.6 Notices. Any communication to be given hereunder by any parties to the
-------
other party shall be in writing and delivered by messenger, sent by overnight
courier, or transmitted by facsimile or electronic mail (with confirmation of
receipt by the intended party), to the address or designation of such party set
forth below or as changed by such party by notice given hereunder. A
communication transmitted by facsimile shall be deemed effective when
transmitted; a communication sent by overnight courier shall be deemed effective
two business days after being sent; and a communication delivery by messenger
shall be deemed effective when delivered.
If to Parent
or Seller: c/o NMT Medical, Inc.
27 Wormwood Street
Boston, Massachusetts 02110-1625
Attention: Thomas M. Tully, President
Facsimile: (617) 737-0924
E-mail: [email protected]
18
<PAGE>
with a copy to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Steven D. Singer, Esq.
Facsimile: (617) 526-5000
E-mail: [email protected]
If to Buyer: c/o Integra LifeSciences Corporation
311 Enterprise Drive
Plainsboro, New Jersey 08536
Attention: Stuart M. Essig and
John B. Henneman, III
Facsimile: (609) 275-1082
E-mail: [email protected]
[email protected]
with copies to: GoodSmith, Gregg & Unruh
300 S. Wacker Drive, Suite 3100
Chicago, Illinois 60606
Attention: Marilee C. Unruh
Facsimile: (312) 322-0056
E-mail: [email protected]
and Latham & Watkins
Sears Tower
Suite 5800
Chicago, Illinois 60606
Attention: Michael D. Levin
Facsimile: (312) 993-9767
E-mail: [email protected]
The foregoing is not intended to be exclusive; any written communication
actually received shall be effective when received.
12.7 Captions. The section captions used in this Agreement are for reference
--------
and cross-reference purposes only and shall not otherwise affect the meaning or
interpretation of this Agreement.
12.8 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed to be an original and all of which shall be deemed to
constitute the same Agreement.
12.9 Knowledge. Any statement in this Agreement qualified by the expression
---------
"so far as Parent or Seller is aware" or "to the knowledge of Parent or Seller"
or any similar expression shall be deemed to include the knowledge of the
officers and directors of each of Parent and
19
<PAGE>
Seller and, additionally, each employee of Parent and Seller whose
responsibilities include managerial decision making for the Business.
12.10 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the Laws of the State of Delaware, without regard to the
conflict of laws principles thereof.
12.11 Entire Agreement. This Agreement (including the Exhibits, Schedules
----------------
and attachments hereto) constitutes the entire agreement between the parties
hereto and supersedes and cancels any prior agreements, representations,
warranties, or communications, whether oral or written, between the parties
hereto relating to the transactions contemplated hereby or the subject matter
herein. Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only by an agreement in writing signed by
the party against whom or which the enforcement of such change, waiver,
discharge or termination is sought.
12.12 Invalidity. In the event that any of the provisions contained in this
----------
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then, to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement.
12.13 Cumulative Remedies. Except as otherwise specifically provided in this
-------------------
Agreement, all rights and remedies of any party hereto are cumulative of each
other and of every other right or remedy such party may otherwise have at law or
in equity, and the exercise of one or more rights or remedies shall not
prejudice or impair the concurrent or subsequent exercise of other rights or
remedies.
12.14 Publicity. So long as this Agreement is in effect, Buyer and Parent
---------
shall use all reasonable efforts to develop a joint communications plan and each
party shall use all reasonable efforts (a) to ensure that all press releases and
other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan and (b) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
12.15 Confidentiality. Prior to the Closing, the parties hereto, and their
---------------
Representatives and assignees shall hold confidential all information obtained
from each of the other parties and their respective Affiliates in connection
herewith and, if the Closing shall be abandoned as provided herein, shall treat
such information as confidential and where such information is in documentary
form, return such information to the party that provided it, provided, however,
-------- -------
each counsel may retain one copy of such information for its files. The
provisions of this Section 12.15 shall not apply to information regarding Seller
-------------
or Parent which is in the public domain due to no fault of Buyer or its
Representatives. The parties hereto, on their own behalf and on behalf of their
respective Representatives and assignees, agree that damages are an inadequate
remedy for breach of this provision and that the non-breaching party shall,
whether or not it is pursuing
20
<PAGE>
any potential remedies at law, be entitled to equitable relief in the form of
preliminary and permanent injunctions without the posting of a bond or other
security upon any actual or threatened breach of this Section 12.15.
-------------
12.16 Use of "NMT" Name. Parent and Seller acknowledge and agree that,
-----------------
while Buyer is not acquiring ownership of the acronym "NMT" (or any derivatives
thereof), Buyer (and its successors and assigns) shall have for a period of
three (3) years from Closing, a limited license to continue to use the acronym
"NMT" to the extent that the same appears or is used upon any promotional or
marketing materials, brochures, information, labels, packaging or similar
materials related to any of the products or used in connection with the
Business, in each case as existing on the Closing Date. Following the Closing
Date, Seller (directly or indirectly through an Affiliate) shall have the right
to monitor the quality of products bearing the acronym "NMT". The license to
acronym "NMT" granted in this Section 12.16 is subject to and conditioned on the
-------------
maintenance of product quality consistent with the quality of Seller's products
on the date hereof.
* * *
[SIGNATURE PAGE FOLLOWS]
21
<PAGE>
IN WITNESS WHEREOF, the parties executed and delivered this Agreement
as of the day and year first above written.
"BUYER"
Integra Selector Corporation
By: /s/ Stuart M. Essig
-----------------------
Name: Stuart M. Essig
----------------------
Title: President
---------------------
"SELLER"
NMT Neurosciences (US), Inc.
By: /s/ Thomas M. Tully
-----------------------
Name: Thomas M. Tully
----------------------
Title: President
---------------------
"PARENT"
NMT Medical, Inc.
By: /s/ Thomas M. Tully
-----------------------
Name: Thomas M. Tully
----------------------
Title: President
---------------------
S-1
<PAGE>
EXHIBIT 1.1(a)
--------------
FINANCIAL STATEMENTS
Revenue for year ended 12/31/99 $2,450,000
Inventory $2,039,000
<PAGE>
EXHIBIT 1.1(b)
--------------
TERMS OF NONCOMPETITION AGREEMENT
Noncompetition: Two (2) year noncompete with a global geographic scope.
- --------------
Nonsolicitation: No nonsolicitation provision with respect to employees of
- ---------------
Seller.
<PAGE>
EXHIBIT 2.5
-----------
ALLOCATION OF PURCHASE PRICE
Inventory $2,039,000
Intangibles $2,000,000
<PAGE>
EXHIBIT 7.4
-----------
CLOSING AGENDA
See attached.
<PAGE>
PURCHASE OF ASSETS
OF
NMT NEUROSCIENCES (US), INC.
BY
INTEGRA SELECTOR CORPORATION
CLOSING CHECKLIST
<TABLE>
<CAPTION>
Responsibility Signed By:
-------------- ----------
A. Agreements
<C> <S> <C> <C>
_____ 1. Asset Purchase Agreement, with attachments GGU Parent
Seller
Buyer
_____ 2. Bill of Sale GGU Seller
_____ 3. Assignment of Trademarks GGU Seller
_____ 4. Assignment of Patents GGU Seller
_____ 5. Noncompetition Agreement GGU Parent
Seller
Buyer
_____ 6. Certified good faith estimate of the Inventory Seller Seller
Amount as of the Closing Date
_____ 7. Receipt GGU Seller
B. Seller's Organizational and Related Documents to
be Delivered on or prior to Closing
_____ 1. Certificate of Incorporation certified by the HD ---
Delaware Secretary of State
_____ 2. Good Standing Certificate from the Delaware HD ---
Secretary of State
_____ 3. Officer's Certificate with respect to: HD Seller
B. Certificate of Incorporation;
C. Bylaws;
D. Incumbency; and
E. Resolutions
C. Parent's Organizational and Related Documents
to be Delivered on or prior to Closing
_____ 1. Certificate of Incorporation certified by the HD ---
Delaware Secretary of State
_____ 2. Good Standing Certificate from the Delaware HD ---
Secretary of State
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
_____ 3. Officer's Certificate with respect to: HD Seller
F. Certificate of Incorporation;
G. Bylaws;
H. Incumbency; and
I. Resolutions
D. Buyer's Organizational and Related Documents to be Delivered on
or prior to Closing
_____ 1. Certificate of Incorporation certified by the GGU ---
Delaware Secretary of State
_____ 2. Good Standing Certificate from the Delaware GGU ---
Secretary of State
_____ 3. Officer's Certificate with respect to: GGU Buyer
J. Certificate of Incorporation;
K. Bylaws;
L. Incumbency; and
M. Resolutions
E. Conditions to Seller's Obligations
_____ 1. Evidence of disposal of certain businesses by Buyer ---
Parent to either an Affiliate of Buyer or any
other Person
_____ 2. Officer's Certificate of Buyer certifying that GGU Buyer
all representations and warranties of Buyer
contained in the Asset Purchase Agreement are
true and correct in all material respects
(without duplication of any materiality
qualifier contained therein) as of the Closing
Date
F. Conditions to Buyer's Obligations
_____ 1. Evidence that Buyer (or an Affiliate of Buyer) Seller ---
has purchased certain complementary businesses
(either from an Affiliate of Seller or any
other Person)
_____ 2. Evidence that transactions contemplated by the Seller ---
Asset Purchase Agreement are exempt from any
Tax withholding obligation of any Tax authority
(i.e., FIRPTA)
_____ 3. Officer's Certificate of Seller and Parent HD Seller
certifying that all representations and Parent
warranties of Seller and Parent contained in
the Asset Purchase Agreement are true and
correct in all material respects (without
duplication of any materiality qualifier
contained therein) as of the Closing Date
</TABLE>
<PAGE>
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
NUMBER SHARES
NMT MEDICAL, INC.
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
CUSIP 629294 10 9
THIS CERTIFIES THAT
is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE,
PER SHARE, OF
NMT MEDICAL, INC.
(the "Corporation") subject to the provisions of the Certificate of
Incorporation and By-Laws of the Corporation and transferable only on the books
of the Corporation by the holder thereof, in person or by attorney upon
surrender of this Certificate properly endorsed.
The Corporation will furnish without charge to each shareholder who so
requests a full statement of the designations, relative rights, preferences and
limitations of the shares of each class of stock which the Corporation is
authorized to issue, of the designations, relative rights, preferences and
limitations of each series of preferred stock which the Corporation is
authorized to issue so far as such terms have been fixed, and of the authority
of the Board of Directors of the Corporation to designate and fix the relative
rights, preferences and limitations of any series of preferred stock which the
Corporation is authorized to issue.
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile Seal of the Corporation and the facsimile signatures
of its authorized officers.
Dated:
[SEAL]
Secretary President
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.)
By
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNF GIFT MIN ACT - Custodian
TEN ENT--as tenants by the entireties --------------------
JT TEN --as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts
common to Minors
Act
-----------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
---------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ----------------------------------------------------------- Shares of the common
stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
- -------------------------------------------------------------------- Attorney to
transfer the said stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated:
--------------------------------
X-------------------------------------------
X-------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
-----------------------------------------------------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
Exhibit 10.23
AGREEMENT dated as of the 22nd day of July, 1993 by and between NITINOL
MEDICAL TECHNOLOGIES, INC., (hereinafter called "Employer") and STEPHEN J.
KLESHINSKI (hereinafter called "Executive").
WITNESSETH
----------
WHEREAS, Employer has developed and is developing medical devices,
including devices made of the shape memory metal alloy, nitinol, the first of
which is a patented vena cava filter;
WHEREAS, Executive has been employed by Employer as director of research
and development and quality control and assurance, and Employer and Executive
desire to enter into an agreement to continue such employment;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto hereby agree as follows:
1. Employment. Employer hereby agrees to employ Executive, and Executive
----------
agrees to serve for the term of this Agreement on the terms and conditions
hereinafter set forth.
2. Term. This Agreement shall be for a term of five (5) years commencing
----
June 1, 1993 and ending May 31, 1998. At the end of such term, or any additional
term, this Agreement shall automatically renew for an additional term of one
year on the same basis as that in effect at the end of any such term, unless one
party shall notify the other in writing, not later than three months prior to
the end of any term, that such party wishes to terminate employment at the end
of the then current term.
3. Extent of Services; Duties. Executive will devote his full time and
--------------------------
efforts to the business and affairs of the Employer and shall not, during the
term of this Agreement, be engaged in any other business activity. Executive
will work in the areas of research and development and quality control and
assurance, and will use his best efforts to promote the interests of Employer.
Executive will hold the office of Vice President, reporting to the Director of
Science and the President and such other person as directed by the President and
the Board of Directors of the Employer. Notwithstanding the foregoing, the
Executive shall not be precluded from devoting such time to his personal
financial affairs as shall not interfere with his duties hereunder, and shall be
entitled to holidays in accordance with the practice of Employer.
4. Compensation. Employer will compensate Executive for all services
------------
rendered hereunder at a salary of $80,000 per annum from June 1, 1993 through
May 31, 1994; $87,000 per annum from June 1, 1994 through May 31, 1995; $94,000
per annum from June 1, 1995 through May 31, 1996; $100,000 per annum from June
1, 1996 through May 31, 1997 and $105,000 per annum from June 1, 1997 through
May 31, 1998.
5. Career Incentive Bonus Plan. Executive was previously granted 30,000
---------------------------
Units under the Career Incentive Bonus Plan. Employer agrees to grant an
additional 120,000 Units under the Plan to Executive, effective as of July 1,
1993 in accordance with the
<PAGE>
terms of the plan. All Units shall convert to common stock of the Company as
provided in the Plan, and when as and if the Company ceases to be an
S corporation.
6. Expenses. Employer shall reimburse Executive against appropriate
--------
vouchers for authorized business expenses reasonably incurred by him in the
performance of his duties pursuant to the terms of this Agreement.
7. Secrecy; Inventions.
-------------------
(a) Executive agrees that he shall not, during or after the
termination of this Agreement, for any reason whatsoever, divulge, furnish
or make accessible to any person, firm, corporation or other business
entity, any confidential information, including but not limited to,
inventions, processes, trade secrets, practices, methods, products or any
confidential or secret aspect of the business of the Employer without the
prior written consent of the Employer. This provision shall not apply to
any confidential information which, through no breach of this agreement by
Executive, becomes generally known in the medical device industry.
(b) Executive agrees to communicate and make known to the Employer in
a preservable manner all significant knowledge acquired by him during the
term of this Agreement, including laboratory notes and logs relating to any
methods, developments, and/or improvements, or know-how which concern, or
could concern the present or future business of the Employer.
(c) Executive agrees to assign to Employer any invention, idea,
discovery or improvement conceived of, developed or perfected, solely or
jointly, by Executive during the term of this Agreement or Executive's
prior Agreement with Employer relating to medical devices or to the making,
fabrication, training or use of nitinol, and to execute all documents and
do all further acts which may be necessary or appropriate to perfect such
assignment and at the request of Employer to cause a patent application to
be made and a patent to issue and/or to defend a patent application or a
patent on any such invention, in the United States and any other country,
provided that all expenses in connection herewith shall be paid by
Employer.
8. During the term of this Agreement and any renewal thereof, Employer
shall pay Executive a 1% royalty on the gross revenues resulting from the sale
of any product made and or sold in a jurisdiction where the Employer has a
patent, filed subsequent to the date of this agreement, on an invention of
Executive. Net Sales shall be the amount actually collected and shall not
include transportation charges. Royalties shall be paid to Executive quarterly
within 75 days after the end of each calendar quarter and Executive shall have
the right within one year after receipt of statement to have a public
accountant, during normal business hours, audit Employer's books to verify the
accuracy of the royalty payments due pursuant to this Section 8.
9. Restrictive Covenant.
--------------------
(a) Executive agrees that during the term hereof and for a period of
18 months next succeeding the termination of his employment with Employer
for any reason whatsoever, he will not directly or indirectly engage in any
business activity in competition with the business then being conducted or
actively contemplated by Employer, whether for Executive's own account or
as executive, partner, officer,
-2-
<PAGE>
director, consultant or holder of more than 5% equity interest in any other
entity or person. Executive further agrees that during said 18 month period
he will not hire, offer to hire, entice away or try to persuade any
executive, employee, supplier or agent of Employer to discontinue the
relationship with the Employer, or assist any member of his immediate
family, any business associate or other person, for consideration or
otherwise, to do any of the aforesaid prohibited things. During the course
of said 18 month period, Executive shall advise Employer, in writing, if he
has received and wishes to accept any offer of employment from such a
competitor. Such writing shall be sufficiently detailed regarding the
nature and scope of the position and compensation offered. The Employer
shall then have thirty (30) days following the receipt of said written
notification to advise Executive of its election:
(i) To waive the provision of this Section 8, only in which case
Executive shall be free to accept such employment subject to all the
other terms and conditions set forth herein; or
(ii) To insist upon full compliance with the provisions of this
Paragraph 9, in which case Employer shall compensate Executive at the
base salary rate actually offered by its competitor for the duration of
the aforesaid 18 month period or until Executive shall be employed
elsewhere.
(b) If Executive shall breach any of this Section 9, all Career
Incentive Bonus Plan benefits, whether vested or unvested, shall lapse
until final resolution of any claims by Employer for money damages, and
Employer, in addition to any money damages, shall be entitled to an
injunction to be issued by a court of competent jurisdiction enjoining,
restraining or restricting Executive from such breach or violation.
10. Miscellaneous.
-------------
(a) Neither this Agreement nor its execution and delivery has been
induced by any representation, stipulation, warranty, agreement or
understanding of any kind other than those specifically set forth herein.
This Agreement constitutes the whole agreement between the parties hereto
and there are no terms other than those contained herein. No variation
hereof shall be deemed valid unless in writing and signed by the parties
hereto and no discharge of the terms hereof shall be deemed valid unless by
full performance by the parties hereto or by a writing signed by the
parties hereto. No waiver by either party of any breach of any provision or
condition of this Agreement shall be deemed a waiver of a breach of a
similar or dissimilar provision or condition at the same time or any prior
or subsequent time or of the provision or condition itself.
(b) Each provision of this Agreement is intended to be severable and
the invalidity or illegality of any portion of this Agreement shall not
affect the validity or legality of the remainder hereof. If any of the
provisions of this Agreement should be determined to be unenforceable by
reason of being unreasonable in duration or in area, then such provision is
intended to and shall extend only for such period of time and in such area
as is determined to be reasonable and enforceable.
(c) This Agreement supersedes and replaces the Agreement between the
parties dated June 1, 1991.
-3-
<PAGE>
(d) All notices, requests, demands and other communications provided
for by this Agreement shall be in writing and shall be deemed to have been
given at the time mailed enclosed in a certified postage-paid envelope,
return receipt requested, addressed to the addresses of the respective
parties stated below or to such changed addresses as such parties may have
fixed by a notice, and simultaneously by facsimile telephone to the Fax
phone number provided by the parties; provided, however, that any notice of
any change of address or change of Fax number shall be effective only upon
receipt.
If to the Employer:
c/o C. Leonard Gordon
461 Fifth Ave. 23rd Floor
New York, NY 10017-6234
Fax (212) 684-3043
cc: Jack Reinstein
7779 Willow Glen Road
Los Angeles, CA 90046-1610
If to the Executive:
599 Country Way
Scituate, MA 02066
(e) This agreement shall inure to the benefit of and be binding upon
the Employer, its successors and assigns, and upon the Executive, his
heirs, executors, administrators and legal representatives.
(f) Captions contained in this Agreement are inserted only as a
matter of convenience and for reference and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision
hereof.
(g) The terms and provisions of this Agreement and any dispute or
controversy arising hereunder shall be governed by the laws of the State of
New York applicable to contracts made and to be performed therein, without
giving effect to the principles of conflicts of laws thereof. Any dispute
or controversy arising out of this Agreement shall be submitted to binding
arbitration to be held in the City of New York in accordance with the rules
of the American Arbitration Association then in effect.
(h) This Agreement may be executed in several counterparts and all so
executed shall constitute one Agreement, binding on all parties hereto,
notwithstanding that all the parties are not signatories to the original or
the same counterpart.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and
seals the day and year first above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ C. Leonard Gordon
------------------------------
C. Leonard Gordon
Chief Executive Officer
/s/ Stephen J. Kleshinski
-------------------------------------
Stephen J. Kleshinski
-5-
<PAGE>
SUPPLEMENTAL AGREEMENT
This Supplemental Agreement by and between NITINOL MEDICAL TECHNOLOGIES,
INC., (hereinafter referred to as "EMPLOYER") and STEPHEN J. KLESHINSKI
(hereinafter referred to as "EXECUTIVE") is effective as of the First day of
June, 1994.
WHEREAS, EMPLOYER has entered into a License Development Agreement by and
between Boston Scientific Corporation and EMPLOYER dated as of the 1st day of
November, 1994 (The "License Agreement").
1. EMPLOYER and EXECUTIVE are parties to a prior Agreement dated as of the
22nd day of July, 1993 (the "Prior Agreement"), a copy of which is attached
hereto. The purpose of this Supplemental agreement is to amend the provisions of
paragraph 8 of the Prior Agreement; but the Prior Agreement shall otherwise
remain in full force and effect.
2. Paragraph 8 of the Prior Agreement is hereby amended to read as
follows:
8. (a) During the term of this Agreement and any renewal thereof,
EMPLOYER shall pay EXECUTIVE a royalty with respect to any product (other
than a product including a Stent, as that term is defined in Section 1.20
of the License Agreement, or a Vena Cava filter product) made, used or sold
by EMPLOYER or any licensee of EMPLOYER in any jurisdiction EMPLOYER has an
Executive Patent (as defined below) the claims of which cover such
manufacture, use or sale. With respect to any such product sold by
EMPLOYER, the royalty shall be 1% of EMPLOYER's Net Sales (defined
substantially as EMPLOYER'S gross sales adjusted as provided in the
definition of Net Sales in Section 1.14 of the License Agreement, with such
modifications as are appropriate to the circumstances) of such products;
with respect to any such products sold (or to be sold) by a third party
from which EMPLOYER directly or indirectly receives any payment with
respect to any Executive Patent, the royalty shall be 5% of such payments.
In the case of an Executive Patent in which EXECUTIVE is not the sole
inventor, the royalty shall be apportioned (e.g., if the product is covered
by only one Executive Patent as to which there are two inventors, EXECUTIVE
shall receive a royalty equal to one-half the royalty which he would have
received if he had been the sole inventor). Notwithstanding the foregoing
no royalty shall be paid to EXECUTIVE with respect to any such product if
EMPLOYER establishes that no invention which is the subject of any
Executive Patent contributed to the value of such product.
(b) EMPLOYER shall pay EXECUTIVE an amount equal to 5% of all
licensing fees actually collected by EMPLOYER in conjunction with the sale
or licensing of Stents or Products (as such terms are defined in Section
1.18 and 1.20 of the License Agreement). With respect to each Stent
Product, such amount shall be due and payable for a period of ten (10)
years following the first commercial sale of such product in any
jurisdiction. In the event that EMPLOYER collects any monies from a third
party as designated as an advance against future license fees, such monies
shall be considered to have been collected when fully vested in EMPLOYER.
<PAGE>
(c) The payments to EXECUTIVE provided in subparagraphs (a) and (b)
above shall if such be reduced by 50% from and after the time when
EXECUTIVE's employment with EMPLOYER is terminated by EXECUTIVE voluntarily
(but not by reason of death, sickness or other disability) or by EMPLOYER
with due cause, but otherwise shall not be reduced, provided, however, that
if termination under such circumstances shall occur within three years of
the date of this Agreement said payment shall terminate.
(d) The payments to EXECUTIVE provided in subparagraphs (a) and (b)
above shall be made as promptly as practicable, but in any event within 75
days at the end of each calendar quarter with respect to payments received
by the EMPLOYER during such calendar quarter; if no payments are due with
respect to any calendar quarter, EMPLOYER shall provide EXECUTIVE a
statement to such effect within the 75 day period. EMPLOYER shall keep
complete and accurate books and records from which the amounts of such
payments may be ascertained, and within one year after receipt of any
payment or statement. EXECUTIVE, or a representative of EXECUTIVE, shall
have the right to examine such books and records during business hours once
in each calendar year to verify the accuracy of such payment or statement.
(e) EMPLOYER's obligations under this Paragraph 8 may be assigned only
in connection with the sale or other transfer of all or substantially all
of EMPLOYER's business to which the subject matter of this paragraph
relates, and then only if the assignee agrees to be bound thereby in a
writing delivered to EXECUTIVE in advance of such transfer.
(f) As used in this Paragraph 8,
"Executive Patent" means any patent issued, and any patent application
filed, after the effective date of the Prior Agreement in which EXECUTIVE
is a sole or joint inventor.
"Stent" shall have the same meaning as nitinol Stent in the Agreement
with Boston Scientific Corporation.
NITINOL MEDICAL TECHNOLOGIES, INC STEPHEN J. KLESHINSKI
By: /s/ C. Leonard Gordon By: /s/ Stephen J. Kleshinski
------------------------------- -----------------------------
C. Leonard Gordon
Chief Executive Officer
Date: January 12, 1995 Date: January 22, 1995
------------------------ -----------------------
-2-
<PAGE>
Exhibit 10.57
WAIVER AND CONSENT AGREEMENT
----------------------------
This is a Waiver and Consent Agreement dated as of March 20, 2000 by and
among Brown Brothers Harriman & Co. ("BBH"), J.H. Whitney & Co. ("JHW"), Whitney
Subordinated Debt Fund, L.P. ("WSDF" and, together with JHW, "Whitney") and the
Borrowers (as defined below) party hereto.
Reference is made to (i) that certain Credit Agreement, dated as of
September 13, 1999 (the "U.S. Credit Agreement"), by and among NMT Medical, Inc.
("NMT") and its domestic subsidiaries (together with NMT, the "U.S. Borrowers")
and BBH, (ii) that certain Credit Agreement, dated as of September 13, 1999 (the
"French Credit Agreement"), by and among NMT NeuroSciences Implants (France) SA
and NMT NeuroSciences Instruments (France) SARL, each a wholly owned subsidiary
of NMT (collectively, the "French Borrowers" and together with the U.S.
Borrowers, the "Borrowers"), and BBH, (iii) that certain Guarantee, dated as of
September 13, 1999 (the "BBH Guarantee"), made by the U.S. Borrowers in favor of
BBH, pursuant to which the U.S. Borrowers guaranteed the obligations of the
French Borrowers under the French Credit Agreement, (iv) that certain Security
Agreement, dated as of September 13, 1999 (the "Security Agreement"), by and
among the U.S. Borrowers and BBH and (iv) that certain letter agreement
regarding the post-closing delivery of certain documentation and the
satisfaction of certain conditions, dated September 13, 1999 (the "Letter
Agreement"). The U.S. Credit Agreement, the French Credit Agreement, the BBH
Guarantee, the Security Agreement and the Letter Agreement are referred to
collectively herein as the "BBH Loan Documents."
Reference is further made to (i) that certain Subordinated Note and Common
Stock Purchase Agreement, dated as of July 8, 1998 (the "Whitney Purchase
Agreement"), by and among WSDF, NMT and, for certain purposes, JHW, as amended
by that certain Amendment No. 1 dated April 14, 1999 ("Amendment No. 1") and as
further amended by that certain Amendment No. 2 dated September 13, 1999
("Amendment No. 2") (the Whitney Purchase Agreement as so amended, the "Amended
Whitney Purchase Agreement"); (ii) that certain Subordinated Promissory Note,
dated as of July 8, 1998, payable to WSDF in the original principal amount of
$6,000,000 (the "Whitney Note") and (iii) that certain Guarantee and Collateral
Agreement, dated as of July 8, 1998 (the "Whitney Guarantee"), by the U.S.
Borrowers in favor of JHW, as Agent, as amended by Amendment No. 2 (as so
amended, the "Amended Whitney Guarantee"). The Amended Whitney Purchase
Agreement, the Whitney Note and the Amended Whitney Guarantee are referred to
collectively herein as the "Whitney Loan Documents."
WHEREAS, NMT has informed BBH and Whitney that: (i) NMT and NMT
NeuroSciences (US), Inc. ("NMT US") intend to enter into a certain asset
purchase agreement (the "ISC Agreement") with Integra Selector Corporation
("ISC") pursuant to which, inter alia, NMT US shall sell to ISC the Assets (as
defined in the ISC Agreement), which transaction is intended to convey the
assets used in or related to the Ruggles(R) business of importing, developing,
manufacturing, customizing, marketing, selling and distributing surgical
instruments and (ii) NMT, NMT US, NMT Neurosciences Holdings (UK) Limited ("NMT
Holdings UK"), NMT Neurosciences (UK) Limited ("NMT UK"), Spembly
<PAGE>
Medical Limited ("SML"), Spembly Cryosurgery Limited ("SCL") and Swedemed AB
("SAB", and collectively with NMT UK, SML and SCL, the "Acquired Companies")
intend to enter into a purchase agreement (the "INH Agreement") with Integra
Neurosciences Holdings (UK) Limited ("Integra UK") and ISC pursuant to which,
inter alia, (a) NMT Holdings UK shall sell to Integra UK all of the capital
shares of NMT UK that are owned by NMT Holdings UK and (b) NMT US shall sell to
ISC the US-Based Assets (as defined in the INH Agreement), which US-Based Assets
include, in summary, those assets owned by NMT US or otherwise located in the
United States that are used or related to the products manufactured, assembled,
repaired, developed, created, invented or researched by or on behalf of the
Acquired Companies (which include, without limitation, the Selector Ultrasonic
Aspirator, cryosurgical and TNS product lines, products in the research and
development stage and other products identified in the Schedule of Products in
the INH Agreement). Each of BBH and Whitney acknowledges receipt of a copy of
the ISC Agreement and the INH Agreement. The transactions contemplated by the
ISC Agreement and the INH Agreement are referred to collectively herein as the
"Sale Transactions."
WHEREAS, NMT intends to use a portion of the expected approximately
$12,000,000 of gross proceeds from the Sale Transactions to repay a portion of
its obligations under the BBH Loan Documents and the Whitney Loan Documents;
WHEREAS, NMT has requested that BBH and Whitney consent to the Sale
Transactions and, in connection therewith, that (i) BBH and Whitney waive
compliance with certain financial and other covenants set forth in the BBH Loan
Documents and the Whitney Loan Documents respectively and (ii) BBH release its
security interest in the Assets and the US-Based Assets; and
WHEREAS, BBH and Whitney have agreed to consent to the Sale Transactions
and waive compliance with certain covenants under the respective BBH Documents
and Whitney Loan Documents and BBH has agreed to release its security interest
in the Assets and the US-Based Assets, all in accordance with the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the promises and
agreements set forth herein, the parties agree as follows:
1. BBH waives compliance by the U.S. Borrowers with the financial
covenants set forth in Section 6.09 of the U.S. Credit Agreement, which
covenants are incorporated by reference into the BBH Guarantee in Section 10(a)
thereof, for the fourth quarter of 1999, but only to the extent of the
deviations from the relevant financial covenants delivered in writing to BBH in
connection herewith. Whitney waives compliance by the U.S. Borrowers with the
financial covenants set forth in Section 9.8 of the Amended Whitney Purchase
Agreement for the fourth quarter of 1999.
2. BBH consents to the entering into agreements for and the consummation
of the Sale Transactions and, in connection therewith, waives any default under
the BBH Loan Documents that might otherwise be caused by or result from such
Sale Transactions, including but not limited to any default due to non-
compliance with Sections 5.03, 5.05 and 6.03 of the U.S. Credit Agreement (as
2
<PAGE>
incorporated by reference into the BBH Guarantee). Whitney consents to the
entering into agreements for and the consummation of the Sale Transactions and,
in connection therewith, waives any default under the Whitney Loan Documents
that might otherwise be caused by or result from such Sale Transactions,
including but not limited to any default due to non-compliance with Sections
9.1, 9.6, 9.7 or 9.10 of the Amended Whitney Purchase Agreement or Section 5.9
of the Amended Whitney Guarantee.
3. The consummation of the Sale Transactions shall not constitute a
"change of control" for purposes of Section 3(b) of the Whitney Note or
otherwise trigger mandatory prepayment of the Whitney Note.
4. BBH shall be paid such amount from the proceeds of the Sale
Transactions as is necessary to pay in full all monetary obligations of the
Borrowers under the French Credit Agreement and to reduce the outstanding
principal balance under the U.S. Credit Agreement as of the date of the Closing
(as defined in paragraph 5 below) to $2,000,000. The parties agree that, upon
such reduction of the principal amount outstanding under the U.S. Credit
Agreement to $2,000,000 and such payment in full of all monetary obligations
under the French Credit Agreement, the amount of the Commitment (as defined in
the U.S. Credit Agreement) and the maximum aggregate principal amount of
permitted Senior Indebtedness (as defined in the Amended Whitney Purchase
Agreement) each shall be reduced to $2,000,000. Without affecting the
effectiveness of the terms of the preceding sentence, the Borrowers agree that
they shall execute as soon as practicable after such payments have been made,
but in no event more than 10 business days after the date such payments have
been made: (i) an amendment to the U.S. Credit Agreement memorializing such
reduction of the Commitment to $2,000,000, in a form reasonably satisfactory to
BBH and (ii) an amendment to the Amended Whitney Purchase Agreement
memorializing such reduction of the permitted Senior Indebtedness to $2,000,000,
in a form reasonably satisfactory to Whitney. In connection with the execution
of this agreement, BBH also shall receive a fee of $50,000 in cash payable on
the date hereof plus a warrant to purchase 20,000 shares of the common stock of
NMT exercisable at the listed price of NMT common stock as of the close of
business on the date hereof (the "Warrant"). The Warrant shall be delivered as
soon as practicable, but in no event more than 10 business days after the date
hereof, in a form reasonably satisfactory to BBH. WSDF shall be paid up to a
total of $1,000,000 (but in no event less than $500,000) from the proceeds of
the Sale Transactions payable as follows: (i) a minimum of $500,000 shall be
paid by the close of business on the first business day after the Closing and
(ii) up to an additional $500,000 shall be paid within 10 business days after
the Closing, which amount shall be determined by NMT's management in good faith
based on the cash flow and budgeting needs of NMT and its subsidiaries. BBH
consents to such payment of up to $1,000,000 to WSDF and, in connection
therewith, waives compliance with the subordination provisions and other payment
restrictions contained in the BBH Loan Documents and the Whitney Note solely to
the extent necessary to allow such payment to WSDF. Additionally, BBH and
Whitney shall be paid their reasonable attorneys' fees in connection with this
transaction (the amount of such fees to be provided to NMT prior to the Closing)
by the close of business on the first business day after the Closing.
3
<PAGE>
5. BBH agrees to release its security interest in the Assets and the US-
Based Assets in connection with the closing of the Sale Transactions (the
"Closing"). Such release shall be effective and self-executing simultaneously
with the Closing (such release shall be deemed to be effective immediately prior
to the conveyance of the Assets and the US-Based Assets, it being intended that
such assets shall be sold free and clear of any security interest or lien of
BBH). BBH agrees to execute, at NMT's expense, any UCC-3 termination statements
and any other documentation reasonably requested by NMT to effectuate or
evidence such security interest terminations. BBH acknowledges that it holds no
security interest in the capital stock of any of the Acquired Companies or in
any of the assets of any of the Acquired Companies.
6. BBH waives the defaults that would otherwise be caused by or result
from, or have been caused by or have resulted from, the failure of the Borrowers
heretofore to deliver the following item required by the Letter Agreement: the
pledge of the stock of Image Technology Corp. (together with related stock
powers executed in blank); provided that the Borrowers shall deliver the
remaining documentation and satisfy the remaining conditions set forth in the
Letter Agreement on or before May 31, 2000. The Borrowers acknowledge and agree
that if all of the documentation required to be delivered under the Letter
Agreement and all of the conditions required to be satisfied as set forth
therein are not so delivered and satisfied on or before May 31, 2000, it shall
constitute an immediate Event of Default under the U.S. Credit Agreement and the
French Credit Agreement.
7. The waivers by BBH and Whitney are limited to those described herein,
and nothing contained herein or in any other communication between any Borrower
and BBH or Whitney shall constitute a consent to any other deviation from the
terms of any of the BBH Loan Documents or Whitney Loan Documents. Except as
expressly set forth herein, nothing contained in this agreement shall be deemed
to modify or amend any of the BBH Loan Documents or Whitney Loan Documents, each
of which remains in full force and effect, or constitute a course of dealing
among the Borrowers and BBH or Whitney.
8. The making of this agreement shall not be construed as: (i) creating
in favor of BBH a right to require its consent or approval to any future
modification, amendment or waiver of or under the Whitney Loan Documents or (ii)
creating in favor of Whitney a right to require its consent or approval to any
future modification, amendment or waiver of or under the BBH Loan Documents.
9. The payment and other obligations of the Borrowers hereunder that are
to be paid or performed after the date hereof shall not affect the validity or
effect of the waivers and consents given by BBH and Whitney herein in connection
with the Sale Transactions, it being intended that the buyers under the Sale
Transactions may rely on the finality of such waivers and consents. The
foregoing sentence shall not affect or be deemed to affect the obligations of
the Borrowers to BBH and Whitney hereunder and any rights that BBH and Whitney
may have under the BBH Loan Documents and the Whitney Loan Documents
respectively. This agreement shall be effective only upon the execution hereof
by BBH, Whitney and the Borrowers.
4
<PAGE>
WHEREFORE, the parties have executed this agreement as a document under
seal as of the date first written above.
BROWN BROTHERS HARRIMAN & CO.
By: /s/ Louise A. Coughlan
------------------------
Name: Louise A. Coughlan
Title: Senior Vice President
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ Daniel J. O'Brien
----------------------
Name: Daniel J. O'Brien
Title: General Partner
J.H. WHITNEY & CO.
By: /s/ Daniel J. O'Brien
----------------------
Name: Daniel J. O'Brien
Title: General Partner
NMT MEDICAL, INC.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: President
NMT HEART, INC.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: President
5
<PAGE>
NMT INVESTMENTS CORP.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: President
NMT NEUROSCIENCES
(INTERNATIONAL), INC.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: President
NMT NEUROSCIENCES (US), INC.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: President
NMT NEUROSCIENCES (IP), INC.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: President
NMT NEUROSCIENCES
INNOVASIVE SYSTEMS, INC.
By: /s/ Thomas M. Tully
--------------------
Name: Thomas M. Tully
Title: President
6
<PAGE>
NMT NEUROSCIENCES IMPLANTS
(FRANCE) SA
By: /s/ David A. Chazanovitz
-------------------------
Name: David A. Chazanovitz
Title: Director
NMT NEUROSCIENCES INSTRUMENTS
(FRANCE) SARL
By: /s/ David A. Chazanovitz
-------------------------
Name: David A. Chazanovitz
Title: Co-Manager
7
<PAGE>
Exhibit 10.58
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
-----------------------------------------------------------
Warrant No. BBH-1 Number of Shares: 20,000
(subject to adjustment)
Date of Issuance: April 3, 2000
NMT MEDICAL, INC.
-----------------
Common Stock Purchase Warrant
-----------------------------
(Void after April 3, 2005)
NMT Medical, Inc., a Delaware corporation (the "Company"), for value
received, hereby certifies that Brown Brothers Harriman & Co., or its registered
assigns (the "Registered Holder"), is entitled, subject to the terms and
conditions set forth below, to purchase from the Company, at any time or from
time to time on or after the date of issuance and on or before 5:00 p.m. (Boston
time) on April 3, 2005, 20,000 shares of Common Stock, $.001 par value per
share, of the Company, at a purchase price of $4.9375 per share. The shares
purchasable upon exercise of this Warrant, and the purchase price per share,
each as adjusted from time to time pursuant to the provisions of this Warrant,
are hereinafter referred to as the "Warrant Shares" and the "Purchase Price,"
respectively.
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form appended hereto
as Exhibit I duly executed by the Registered Holder or by the Registered
Holder's duly authorized attorney, at the principal office of the Company, or at
such other office or agency as the Company may designate, accompanied by payment
in full, in lawful money of the United States, of the Purchase Price payable in
respect of the number of Warrant Shares purchased upon such exercise.
(b) The Registered Holder may, at its option, elect to pay some or
all of the Purchase Price payable upon an exercise of this Warrant by cancelling
a portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing (i) the total Purchase Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (ii) the excess
of the Fair Market Value per share of Common Stock (as defined below) as of the
Exercise Date (as defined in subsection 1(c) below) over the Purchase Price per
share. If the Registered Holder wishes to exercise this Warrant pursuant to this
method of payment with respect to the maximum number of Warrant Shares
purchasable pursuant to this method, then the number of Warrant Shares so
purchasable shall be equal to the total number of Warrant Shares, minus the
product obtained by multiplying (x) the total number of Warrant Shares by (y) a
fraction, the numerator of which shall be the Purchase Price per share and the
denominator of
<PAGE>
which shall be the Fair Market Value per share of Common Stock as of the
Exercise Date. The Fair Market Value per share of Common Stock shall be
determined as follows:
(i) If the Common Stock is listed on a national securities
exchange, the Nasdaq National Market or another nationally recognized trading
system as of the Exercise Date, the Fair Market Value per share of Common Stock
shall be deemed to be the average of the high and low reported sale prices per
share of Common Stock thereon on the trading day immediately preceding the
Exercise Date; or, if no such price is reported on such date, the average of
the high and low reported sale prices per share of Common Stock on the next
preceding day with a trade (but not more than five trading days) (provided that
if no such price is reported on such day, the Fair Market Value per share of
Common Stock shall be determined pursuant to clause (ii)).
(ii) If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market or another nationally recognized trading
system as of the Exercise Date, the Fair Market Value per share of Common Stock
shall be deemed to be the amount most recently determined by the Board of
Directors to represent the fair market value per share of the Common Stock
(including without limitation a determination for purposes of granting Common
Stock options or issuing Common Stock under an employee benefit plan of the
Company); and, upon request of the Registered Holder, the Board of Directors (or
a representative thereof) shall promptly notify the Registered Holder of the
Fair Market Value per share of Common Stock. Notwithstanding the foregoing, if
the Board of Directors has not made such a determination within the three-month
period prior to the Exercise Date, then (A) the Board of Directors shall make a
determination of the Fair Market Value per share of the Common Stock within 15
days of a request by the Registered Holder that it do so, and (B) the exercise
of this Warrant pursuant to this subsection 1(b) shall be delayed until such
determination is made.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided in subsection 1(a) above
(the "Exercise Date"). At such time, the person or persons in whose name or
names any certificates for Warrant Shares shall be issuable upon such exercise
as provided in subsection 1(d) below shall be deemed to have become the holder
or holders of record of the Warrant Shares represented by such certificates.
(d) As soon as practicable after the exercise of this Warrant in full or
in part, and in any event within 10 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant
Shares to which the Registered Holder shall be entitled upon such exercise plus,
in lieu of any fractional share to which the Registered Holder would otherwise
be entitled, cash in an amount determined pursuant to Section 3 hereof; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the sum of (a) the number of such shares purchased by
the Registered Holder upon such exercise plus (b) the number of Warrant
-2-
<PAGE>
Shares (if any) covered by the portion of this Warrant cancelled in payment of
the Purchase Price payable upon such exercise pursuant to subsection 1(b) above.
2. Adjustments.
-----------
(a) Diluting Issuances.
------------------
(i) Definitions. For purposes of this Section 2, the following
definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.
(B) "Original Issue Date" shall mean the date on which this
Warrant was first issued.
(C) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible
into or exchangeable for Common Stock, but excluding Options.
(D) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to subsection 2(a)(iii) below, deemed to be
issued) by the Company after the Original Issue Date, other than:
(I) shares of Common Stock issued or issuable upon conversion
or exchange of any Convertible Securities or exercise of
any Options outstanding on the Original Issue Date;
(II) shares of Common Stock issued or issuable by reason of a
dividend, stock split, split-up or other distribution on
shares of Common Stock that are covered by subsections
2(b) or 2(c) below; or
(III) shares of Common Stock (or Options with respect thereto)
issued or issuable to employees or directors of, or
consultants to, the Company pursuant to a plan or
arrangement approved by the Board of Directors of the
Company.
(ii) No Adjustment of Purchase Price. No adjustments to the
Purchase Price shall be made unless the consideration per share (determined
pursuant to subsection 2(a)(v)) for an Additional Share of Common Stock issued
or deemed to be issued by the Company is less than the Purchase Price in effect
immediately prior to the issue of such Additional Shares.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock. If the Company at any time or from time to time after the Original
Issue Date shall issue
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<PAGE>
any Options (excluding Options covered by subsection 2(a)(i)(D)(III) above) or
Convertible Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common Stock (as
set forth in the instrument relating thereto without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to subsection 2(a)(v) hereof) of such Additional Shares of
Common Stock would be less than the Purchase Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(A) No further adjustment in the Purchase Price shall be made upon
the subsequent issue of Convertible Securities or shares of Common Stock upon
the exercise of such Options or conversion or exchange of such Convertible
Securities;
(B) If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Company, then upon the exercise, conversion or
exchange thereof, the Purchase Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(C) Upon the expiration or termination of any such unexercised
Option, the Purchase Price shall not be readjusted, but the Additional Shares of
Common Stock deemed issued as the result of the original issue of such Option
shall not be deemed issued for the purposes of any subsequent adjustment of the
Purchase Price;
(D) In the event of any change in the number of shares of Common
Stock issuable upon the exercise, conversion or exchange of any such Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Purchase Price then in effect shall
forthwith be readjusted to such Purchase Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security not exercised, converted or exchanged prior to such change been made
upon the basis of such change; and
(E) No readjustment pursuant to clause (B) or (D) above shall have
the effect of increasing the Purchase Price to an amount which exceeds the lower
of (i) the Purchase Price on the original adjustment date, or (ii) the Purchase
Price that would have resulted from any issuances of Additional Shares of Common
Stock between the original adjustment date and such readjustment date.
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<PAGE>
In the event the Company, after the Original Issue Date, amends the terms
of any such Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the Original Issue Date or were
issued after the Original Issue Date), then such Options or Convertible
Securities, as so amended, shall be deemed to have been issued after the
Original Issue Date and the provisions of this subsection 2(a)(iii) shall apply.
(iv) Adjustment of Purchase Price Upon Issuance of Additional
Shares of Common Stock.
(A) In the event the Company shall at any time after the
Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to subsection
2(a)(iii)), without consideration or for a consideration per share less than the
Purchase Price in effect immediately prior to such issue, then and in such
event, such Purchase Price shall be reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by multiplying such Purchase
Price by a fraction, (A) the numerator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to such issue plus (2) the
number of shares of Common Stock which the aggregate consideration received or
to be received by the Company for the total number of Additional Shares of
Common Stock so issued would purchase at such Purchase Price; and (B) the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of such Additional Shares of
Common Stock so issued; provided that, (i) for the purpose of this subsection
2(a)(iv), all shares of Common Stock issuable upon conversion or exchange of
Convertible Securities outstanding immediately prior to such issue shall be
deemed to be outstanding, and (ii) the number of shares of Common Stock deemed
issuable upon conversion or exchange of such outstanding Convertible Securities
shall not give effect to any adjustments to the conversion or exchange price or
conversion or exchange rate of such Convertible Securities resulting from the
issuance of Additional Shares of Common Stock that is the subject of this
calculation.
(B) Notwithstanding the foregoing, the applicable
Purchase Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $.01, but any such amount shall be
carried forward and reduction with respect thereto shall be made at the time of
and together with any subsequent reduction which, together with such amount and
any other amount or amounts so carried forward, shall aggregate $.01 or more.
(v) Determination of Consideration. For purposes of this
subsection 2(a), the consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
(I) insofar as it consists of cash, be computed at the
aggregate of cash received by the Company, excluding
amounts paid or payable for accrued interest;
(II) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time
of
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<PAGE>
such issue, as determined in good faith by the Board of
Directors; and
(III) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets
of the Company for consideration which covers both, be
the proportion of such consideration so received,
computed as provided in clauses (I) and (II) above, as
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration
per share received by the Company for Additional Shares of Common Stock deemed
to have been issued pursuant to subsection 2(a)(iii), relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by
the Company as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) Multiple Closing Dates. In the event the Company shall issue
on more than one date Additional Shares of Common Stock which are comprised of
shares of the same series or class of Preferred Stock, and such issuance dates
occur within a period of no more than 120 days, then, upon the final such
issuance, the Purchase Price shall be readjusted to give effect to all such
issuances as if they occurred on the date of the final such issuance (and
without giving effect to any adjustments as a result of such prior issuances
within such period).
(b) Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock, the Purchase Price then in effect
immediately before that subdivision shall be proportionately decreased. If the
Company shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock, the Purchase Price then in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this paragraph shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(c) Adjustment for Certain Dividends and Distributions. In the event the
Company at any time, or from time to time after the Original Issue Date shall
make or issue, or
-6-
<PAGE>
fix a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Purchase Price then in effect immediately
before such event shall be decreased as of the time of such issuance or, in the
event such a record date shall have been fixed, as of the close of business on
such record date, by multiplying the Purchase Price then in effect by a
fraction:
(1) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution;
provided, however, if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Purchase Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Purchase Price shall be
adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions.
(d) Adjustment in Number of Warrant Shares. When any adjustment is
required to be made in the Purchase Price pursuant to subsections 2(a), 2(b) or
2(c), the number of Warrant Shares purchasable upon the exercise of this Warrant
shall be changed to the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of this Warrant immediately prior to
such adjustment, multiplied by the Purchase Price in effect immediately prior to
such adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(e) Adjustments for Other Dividends and Distributions. In the event the
Company at any time or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
securities of the Company (other than shares of Common Stock) or in cash or
other property (other than cash out of earnings or earned surplus, determined in
accordance with generally accepted accounting principles), then and in each such
event provision shall be made so that the Registered Holder shall receive upon
exercise hereof, in addition to the number of shares of Common Stock issuable
hereunder, the kind and amount of securities of the Company and/or cash and
other property which the Registered Holder would have been entitled to receive
had this Warrant been exercised into Common Stock on the date of such event and
had the Registered Holder thereafter, during the period from the date of such
event to and including the Exercise Date, retained any such securities
receivable, giving application to all adjustments called for during such period
under this Section 2 with respect to the rights of the Registered Holder.
(f) Adjustment for Mergers or Reorganizations, etc. If there shall occur
any reorganization, recapitalization, consolidation or merger involving the
Company in which the
-7-
<PAGE>
Common Stock is converted into or exchanged for securities, cash or other
property (other than a transaction covered by subsections 2(b), 2(c) or 2(e)),
then, following any such reorganization, recapitalization, consolidation or
merger, the Registered Holder shall receive upon exercise hereof the kind and
amount of securities, cash or other property which the Registered Holder would
have been entitled to receive if, immediately prior to such reorganization,
recapitalization, consolidation or merger, the Registered Holder had held the
number of shares of Common Stock subject to this Warrant. In any such case,
appropriate adjustment (as determined in good faith by the Board of Directors of
the Company) shall be made in the application of the provisions set forth herein
with respect to the rights and interests thereafter of the Registered Holder, to
the end that the provisions set forth in this Section 2 (including provisions
with respect to changes in and other adjustments of the Purchase Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
securities, cash or other property thereafter deliverable upon the exercise of
this Warrant.
(g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Purchase Price pursuant to this Section 2, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Registered Holder a
certificate setting forth such adjustment or readjustment (including the kind
and amount of securities, cash or other property for which this Warrant shall be
exercisable and the Purchase Price) and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the Registered Holder, furnish or cause to be furnished
to the Registered Holder a certificate setting forth (i) the Purchase Price then
in effect and (ii) the number of shares of Common Stock and the amount, if any,
of other securities, cash or property which then would be received upon the
exercise of this Warrant.
3. Fractional Shares. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value per share of
Common Stock, as determined pursuant to subsection 1(b) above.
4. Requirements for Transfer.
(a) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Act"), or (ii) the Company first shall
have been furnished with an opinion of legal counsel, reasonably satisfactory to
the Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act.
(b) Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for (i) a transfer by a Registered Holder which is a
corporation to a wholly owned subsidiary of such corporation, a transfer by a
Registered Holder which is a partnership to a partner of such partnership or a
retired partner of such partnership or to the estate of any such partner or
retired partner, or a transfer by a Registered Holder which is a limited
liability company to a member of such limited liability company or a retired
member or to the estate of any such member or retired member, provided that the
transferee in each case agrees in writing
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<PAGE>
to be subject to the terms of this Section 4, or (ii) a transfer made in
accordance with Rule 144 under the Act.
(c) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not
be offered, sold or otherwise transferred, pledged or hypothecated
unless and until such securities are registered under such Act or an
opinion of counsel satisfactory to the Company is obtained to the
effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing
any Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
5. No Impairment. The Company will not, by amendment of its charter or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder of this Warrant against impairment.
6. Notices of Record Date, etc. In the event:
(a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to subscribe for or
purchase any shares of stock of any class or any other securities, or to receive
any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the Common Stock of the Company, any consolidation or merger
of the Company with or into another corporation (other than a consolidation or
merger in which the Company is the surviving entity and its Common Stock is not
converted into or exchanged for any other securities or property), or any
transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder a notice specifying, as the case may be, (i) the record date
for such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock
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<PAGE>
(or such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be mailed at least ten
days prior to the record date or effective date for the event specified in such
notice.
7. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other securities, cash and/or property, as
from time to time shall be issuable upon the exercise of this Warrant.
8. Exchange of Warrants. Upon the surrender by the Registered Holder,
properly endorsed, to the Company at the principal office of the Company, the
Company will, subject to the provisions of Section 4 hereof, issue and deliver
to or upon the order of such Holder, at the Company's expense, a new Warrant or
Warrants of like tenor, in the name of the Registered Holder or as the
Registered Holder (upon payment by the Registered Holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock (or other securities, cash
and/or property) then issuable upon exercise of this Warrant.
9. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
10. Transfers, etc.
(a) The Company will maintain a register containing the name and
address of the Registered Holder of this Warrant. The Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, upon surrender of
this Warrant with a properly executed assignment (in the form of Exhibit II
hereto) at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder as the absolute owner
hereof for all purposes; provided, however, that if and when this Warrant is
properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
11. Mailing of Notices, etc. All notices and other communications from
the Company to the Registered Holder shall be mailed by first-class certified or
registered mail, postage prepaid, to the address last furnished to the Company
in writing by the Registered Holder. All notices and other communications from
the Registered Holder or in connection herewith to the Company shall be mailed
by first-class certified or registered mail, postage prepaid, to the Company at
its principal office set forth below. If the Company should at any time change
the
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<PAGE>
location of its principal office to a place other than as set forth below,
it shall give prompt written notice to the Registered Holder and thereafter all
references in this Warrant to the location of its principal office at the
particular time shall be as so specified in such notice.
The Company:
NMT Medical, Inc.
27 Wormwood Street
Boston, MA 02110
Facsimile Number: (617) 737-1267
Attention: Chief Financial Officer
12. No Rights as Stockholder. Until the exercise of this Warrant, the
Registered Holder shall not have or exercise any rights by virtue hereof as a
stockholder of the Company. Notwithstanding the foregoing, in the event (i) the
Company effects a split of the Common Stock by means of a stock dividend and the
Purchase Price of and the number of Warrant Shares are adjusted as of the date
of the distribution of the dividend (rather than as of the record date for such
dividend), and (ii) the Registered Holder exercises this Warrant between the
record date and the distribution date for such stock dividend, the Registered
Holder shall be entitled to receive, on the distribution date, the stock
dividend with respect to the shares of Common Stock acquired upon such exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on the record date for such stock dividend.
13. Change or Waiver. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
14. Section Headings. The section headings in this Warrant are for the
convenience of the parties and in no way alter, modify, amend, limit or restrict
the contractual obligations of the parties.
15. Governing Law. This Warrant will be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts (without
reference to the conflicts of law provisions thereof).
EXECUTED as of the Date of Issuance indicated above.
NMT Medical, Inc.
By: /s/ William J. Knight
----------------------
[Corporate Seal] Title: Vice President and
------------------
Chief Financial Officer
-----------------------
ATTEST:
/s/ Ian J. Platt
- -------------------------
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<PAGE>
EXHIBIT I
---------
PURCHASE FORM
-------------
To:_________________ Dated:_______________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. BBH-1), hereby irrevocably elects to purchase (check applicable
box):
[ ] _____ shares of the Common Stock covered by such Warrant; or
[ ] the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth in
Section 1(b).
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is $________.
Such payment takes the form of (check applicable box or boxes):
[ ] $______ in lawful money of the United States; and/or
[ ] the cancellation of such portion of the attached Warrant as
is exercisable for a total of _____ Warrant Shares (using a Fair
Market Value of $_____ per share for purposes of this calculation);
and/or
[ ] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in Section 1(b),
to exercise this Warrant with respect to the maximum number of Warrant
Shares purchasable pursuant to the cashless exercise procedure set
forth in Section 1(b).
Signature:_____________________
Address: _____________________
_____________________
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<PAGE>
EXHIBIT II
----------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (No. BBH-1) with respect to the number of shares of Common Stock covered
thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Dated:_____________________ Signature:________________________________
Signature Guaranteed:
By: _______________________
the signature should be guaranteed
by an eligible guarantor institution
(banks, stockbrokers, savings and loan
associations and credit unions with
membership in an approved signature
guarantee medallion program) pursuant
to Rule 17Ad-15 under the Securities
Exchange Act of 1934.
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<PAGE>
Exhibit 21.1
List of subsidiaries for NMT Medical, Inc.:
NMT Heart, Inc.
NMT Investments Corp.
Nitinol Medical Technologies FSC, Inc.
Nitinol Medical Technologies International B.V.
NMT NeuroSciences (International), Inc.
NMT NeuroSciences (US), Inc.
NMT NeuroSciences (IP), Inc.
NMT NeuroSciences Holdings (UK) Limited
NMT NeuroSciences Holdings B.V.
NMT NeuroSciences (UK) Limited*
Spembly Medical Ltd.*
Spembly Cryosurgery Ltd.*
Swedemed AB*
NMT NeuroSciences (Belgium) SA
NMT NeuroSciences Instruments B.V.
NMT NeuroSciences Holdings (France) SA
NMT NeuroSciences (Hong Kong) Limited
NMT NeuroSciences GmbH
NMT Innovasive Systems, Inc.
NMT NeuroSciences (Spain) SA
NMT NeuroSciences Implants (France) SA
NMT NeuroSciences Instruments (France) SARL
- --------------------
* Sold to Integra Neurosciences Holdings (UK) Ltd. on April 5, 2000.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statement File Nos. 333-31751 and 333-67265.
/s/ Arthur Andersen LLP
Boston, Massachusetts
April 14, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND FOR THE YEAR THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,533,475
<SECURITIES> 0
<RECEIVABLES> 8,813,099
<ALLOWANCES> 871,000
<INVENTORY> 4,634,348
<CURRENT-ASSETS> 18,496,938
<PP&E> 13,540,635
<DEPRECIATION> 2,522,588
<TOTAL-ASSETS> 38,747,166
<CURRENT-LIABILITIES> 9,732,324
<BONDS> 0
0
0
<COMMON> 10,784
<OTHER-SE> 14,150,695
<TOTAL-LIABILITY-AND-EQUITY> 38,747,166
<SALES> 32,948,584
<TOTAL-REVENUES> 35,079,368
<CGS> 15,215,081
<TOTAL-COSTS> 30,105,329
<OTHER-EXPENSES> 2,718,498
<LOSS-PROVISION> 185,000
<INTEREST-EXPENSE> 2,814,211
<INCOME-PRETAX> 12,959,540
<INCOME-TAX> 180,000
<INCOME-CONTINUING> (15,757,968)
<DISCONTINUED> (3,294,726)
<EXTRAORDINARY> (2,618,428)
<CHANGES> 0
<NET-INCOME> (19,052,693)
<EPS-BASIC> $(1.77)
<EPS-DILUTED> $(1.77)
</TABLE>
